-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, POKEaUfu3IYnixyMCNDbR4+BuCOauiD0umKYumJbumS8oE8T13n5PCjPxsJjGJ2Q yrYuNoWRnVyiaRbdrLab9g== 0000950129-99-002307.txt : 19990518 0000950129-99-002307.hdr.sgml : 19990518 ACCESSION NUMBER: 0000950129-99-002307 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARRIZO OIL & GAS INC CENTRAL INDEX KEY: 0001040593 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 760415919 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-29187-87 FILM NUMBER: 99628320 BUSINESS ADDRESS: STREET 1: 14811 ST MARYS LANE STREET 2: STE 148 CITY: HOUSTON STATE: TX ZIP: 77079 BUSINESS PHONE: 2814961352 MAIL ADDRESS: STREET 1: CARRIZO OIL & GAS INC STREET 2: 14811 ST MARYS LANE STE 148 CITY: HOUSTON STATE: TX ZIP: 77079 10-Q 1 CARRIZO OIL & GAS, INC. - DATED 03/31/99 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended MARCH 31, 1999 -------------- [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to _________ Commission File Number 000-22915. CARRIZO OIL & GAS, INC. (Exact name of registrant as specified in its charter) TEXAS 76-0415919 - ------------------------------- ------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 14811 ST. MARY'S LANE, SUITE 148, HOUSTON, TEXAS 77079 - ------------------------------------------------ ----- (Address of principal executive offices) (Zip Code) (281) 496-1352 -------------- (Registrant's telephone number) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares outstanding of the registrant's common stock, par value $0.01 per share, as of May 12, 1999, the latest practicable date, was 10,375,000. 2 CARRIZO OIL & GAS, INC. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999 INDEX
PART I. FINANCIAL INFORMATION PAGE Item 1. Condensed Balance Sheets - As of March 31, 1999 and December 31, 1998 2 Condensed Statements of Operations - For the three-month periods ended March 31, 1998 and 1999 3 Condensed Statements of Cash Flows - For the three-month periods ended March 31, 1998 and 1999 4 Notes to Condensed Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 PART II. OTHER INFORMATION Items 1-6. 16 SIGNATURES 18
3 CARRIZO OIL & GAS, INC. CONDENSED BALANCE SHEETS
December 31, March 31, 1998 1999 ------------ ------------ (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 1,187,656 $ 1,834,437 Accounts receivable 4,227,365 3,927,229 Advances to operators 1,192,079 836,099 Other current assets 117,614 117,614 ------------ ------------ Total current assets 6,724,714 6,715,379 PROPERTY AND EQUIPMENT, net (full-cost method of accounting for oil and gas properties) 57,878,191 59,097,733 OTHER ASSETS 385,127 306,883 ------------ ------------ $ 64,988,032 $ 66,119,995 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable, trade $ 10,003,376 $ 9,052,949 Dividends payable 720,360 736,568 Other current liabilities 275,116 231,101 Current maturities of long-term debt 930,000 4,828,445 ------------ ------------ Total current liabilities 11,928,852 14,849,063 LONG-TERM DEBT (Note 4) 11,126,000 9,844,405 DEFERRED INCOME TAXES -- -- MANDATORILY REDEEMABLE PREFERRED STOCK (10,000,000 shares authorized with 320,110.53 and 327,286.69 issued and outstanding at December 31, 1998 and March 31, 1999, respectively) (Note 5) 30,730,695 31,503,330 SHAREHOLDERS' EQUITY: Warrants (Note 5) 300,000 300,000 Common Stock (40,000,000 shares authorized with 10,375,000 issued and Outstanding at December 31, 1998 and March 31, 1999, respectively) 103,750 103,750 Additional paid-in capital 32,845,727 32,845,727 Retained earnings (deficit) (21,907,082) (23,326,280) Deferred compensation (139,910) -- ------------ ------------ 11,202,485 9,923,197 ------------ ------------ $ 64,988,032 $ 66,119,995 ============ ============
The accompanying notes are an integral part of these financial statements. -2- 4 CARRIZO OIL & GAS, INC. UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, -------------------------------- 1998 1999 ------------ ------------ OIL AND NATURAL GAS REVENUES $ 2,338,882 $ 1,842,314 COSTS AND EXPENSES: Oil and natural gas operating expenses 629,446 743,704 Depreciation, depletion and amortization 759,504 943,191 General and administrative 834,352 707,525 ------------ ------------ Total costs and expenses 2,223,302 2,394,420 ------------ ------------ OPERATING INCOME (LOSS) 115,580 (552,106) OTHER INCOME AND EXPENSES: Interest income 193,503 6,485 Interest expense (57,731) (260,382) Capitalized interest 54,646 260,382 ------------ ------------ INCOME (LOSS) BEFORE INCOME TAXES 305,998 (545,621) INCOME TAXES 120,463 7,002 ------------ ------------ NET INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 185,535 (552,623) CUMULATIVE EFFECT OF CHANGE IN METHOD OF REPORTING COSTS OF START-UP ACTIVITIES (Note 6) -- 77,731 ------------ ------------ NET INCOME (LOSS) $ 185,535 $ (630,354) ============ ============ LESS: DIVIDENDS AND ACCRETION ON PREFERRED SHARES (670,494) (788,843) ------------ ------------ NET LOSS AVAILABLE TO COMMON SHAREHOLDERS $ (484,959) $ (1,419,197) ============ ============ BASIC AND DILUTED LOSS PER COMMON SHARE BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (Note 3) $ (.05) $ (.13) BASIC AND DILUTED LOSS PER COMMON SHARE OF CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (Notes 3 and 6) -- (.01) ------------ ------------ BASIC AND DILUTED LOSS PER COMMON SHARE (Note 3) $ (.05) $ (.14) ============ ============
The accompanying notes are an integral part of these financial statements. -3- 5 CARRIZO OIL & GAS, INC. UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, -------------------------------- 1998 1999 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 185,535 $ (630,354) Adjustment to reconcile net income (loss) to net cash provided by operating activities- Depreciation, depletion and amortization 759,504 943,191 Deferred income taxes 99,903 -- Cumulative effect of change in accounting principle -- 77,731 Changes in assets and liabilities- Accounts receivable 535,122 300,136 Other assets (7,980) (86,378) Accounts payable, trade (5,013,493) (1,119,729) Other current liabilities (13,197) (44,015) ------------ ------------ Net cash used in operating activities (3,454,606) (559,418) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures, accrual basis (8,918,344) (1,935,933) Adjustment to cash basis 734,773 169,302 Advance to operators (96,856) 355,980 ------------ ------------ Net cash used in investing activities (8,280,427) (1,410,651) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from sale of preferred stock 28,810,431 -- Proceeds from long-term debt -- 2,616,850 Debt repayments (7,950,000) -- ------------ ------------ Net cash provided by financing activities 20,860,431 2,616,850 ------------ ------------ NET INCREASE IN CASH AND CASH EQUIVALENTS 9,125,398 646,781 CASH AND CASH EQUIVALENTS, beginning of period 2,674,837 1,187,656 ------------ ------------ CASH AND CASH EQUIVALENTS, end of period $ 11,800,235 $ 1,834,437 ============ ============ SUPPLEMENTAL CASH FLOW DISCLOSURES: Cash paid for interest (net of amounts capitalized) $ -- $ -- ============ ============
The accompanying notes are an integral part of these financial statements. -4- 6 CARRIZO OIL & GAS, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 1. ORGANIZATION AND PRINCIPLES OF COMBINATION: The condensed financial statements included herein have been prepared by Carrizo Oil & Gas, Inc. (the Company), and are unaudited, except for the balance sheet at December 31, 1998, which has been prepared from the audited financial statements at that date. The financial statements reflect necessary adjustments, all of which were of a recurring nature, and are in the opinion of management necessary for a fair presentation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). The Company believes that the disclosures presented are adequate to allow the information presented not to be misleading. The condensed financial statements included herein should be read in conjunction with the audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. The Company was formed in 1993 and is the surviving entity after a series of combination transactions (the Combination). The Combination included the following transactions: (a) Carrizo Production, Inc. (a Texas corporation and an affiliated entity with ownership substantially the same as Carrizo), was merged into Carrizo and the outstanding shares of capital stock of Carrizo Production, Inc., were exchanged for an aggregate of 343,000 shares of common stock of Carrizo; (b) Carrizo acquired Encinitas Partners Ltd. (a Texas limited partnership of which Carrizo Production, Inc., served as the general partner) as follows: Carrizo acquired from the shareholders who serve as directors of Carrizo their limited partner interests in Encinitas Partners Ltd. for an aggregate consideration of 468,533 shares of common stock and, on the same date, Encinitas Partners Ltd. was merged into Carrizo and the outstanding limited partner interests in Encinitas Partners Ltd. were exchanged for an aggregate of 860,699 shares of common stock; (c) La Rosa Partners Ltd. (a Texas limited partnership of which Carrizo served as the general partner) was merged into Carrizo and the outstanding limited partner interests in La Rosa Partners Ltd. were exchanged for an aggregate of 48,700 shares of common stock; and (d) Carrizo Partners Ltd. (a Texas limited partnership of which Carrizo served as the general partner) was merged into Carrizo and the outstanding limited partner interests in Carrizo Partners Ltd. were exchanged for an aggregate of 569,068 shares of common stock. Simultaneous with the Combination, the Company completed its initial public offering (the Offering) of 2,875,000 shares of its common stock at a public offering price of $11.00 per share. The Offering provided the Company with proceeds of approximately $28.1 million, net of expenses. The Combination was accounted for as a reorganization of entities as prescribed by Securities and Exchange Commission (SEC) Staff Accounting Bulletin 47 because of the high degree of common ownership among, and the common control of, the combining entities. Accordingly, the accompanying financial statements have been prepared using the historical costs and results of operations of the affiliated entities. There were no significant differences in accounting methods or their application among the combining entities. All intercompany balances have been eliminated. Certain reclassifications have been made to prior period amounts to conform to the current period's financial statement presentation. -5- 7 2. GOING CONCERN: The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. Due principally to depressed oil and gas prices, the Company's operating cash flows have decreased significantly in 1998 and through the first quarter of 1999. The Company projects that, after considering advances and borrowing base adjustments obtained during the first quarter of 1999, and without further increases in borrowing base capacity under its existing revolving credit facility, debt repayments totaling approximately $4,828,445 will be required in the 12 months ended March 31, 1999. The Company raised $2 million in additional financing under its existing credit facility in March 1999; however, it is anticipated that these proceeds will be utilized to fund the Company's ongoing drilling program and for working capital. The Company must find additional oil and gas reserves in order to significantly increase the financing available through its existing revolving credit facility. The Company projects that its cash sources will exceed its planned needs for cash in 1999. Such cash sources include additional borrowings subject to borrowing availability, cash flows from currently producing properties along with those nearing completion or pending pipeline hookup and projected net cash flows from wells to be drilled. Cash needs in 1999 include debt requirements, working capital, drilling expenditures, lease bonus payments, geological and geophysical costs on its active exploration projects and cash general and administrative costs. The Company also has specific plans which involve, among other things, cost reductions, hedging activities to lock in higher prices and the drilling of high probability exploration and development prospects that it believes will generate the necessary borrowing capacity and cash flow to fund its 1999 obligations. There are no assurances, however, that the Company will be able to generate cash flows sufficient to pay all of its 1999 obligations as they become due because of the sensitivity of such cash flow projections to factors such as oil and natural gas sales price volatility, production levels, operating cost fluctuations, and other variables inherent in the oil and gas industry. The current uncertainties surrounding the sufficiency of its future cash flows and the lack of firm commitments for additional capital raise substantial doubt about the ability of the Company to continue as a going concern. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern. As of March 31, 1999 and December 31, 1998, respectively, the Company had $37,432,153 and $37,060,418 of investment in unevaluated properties. In order to fully realize this investment through the exploration and development of these properties, additional capital resources above the amount currently available from the borrowing base and net cash flow from operations will be necessary to fund such capital expenditures. The Company is continuing to seek additional financing from a variety of sources, including new common or preferred equity investors and additional debt financing. No assurance can be given that additional financing will be available by these or other means on terms acceptable to the Company. Without a continued increase in commodity prices, successful drilling or raising additional capital, the Company anticipates that it will be required to limit or defer its planned oil and gas exploration and development program, which could adversely affect the recoverability and ultimate value of the Company's oil and gas properties. The Company has the ability to control the pace of drilling in projects where it has a 100 percent working interest. In other projects where the Company only has a partial ownership, the Company generally has the right, but not the obligation, to participate for its percentage interest in drilling wells and can decline to participate if it does not have sufficient capital resources at the time such drilling operations commence. The Company may also transfer its right to participate in drilling wells in exchange for cash, a reversionary interest, or some combination thereof or may seek to sell or transfer all or a portion of its interest in undeveloped properties. 3. EARNINGS PER COMMON SHARE: Supplemental earning per share information is provided below:
For the Three Months Ended March 31,1998 ---------------------------------------------------- Per-Share Income Shares Amount ------------ ---------- ------------ Net Income $ 185,535 Less: Dividends and accretion on preferred stock (670,494) ------------ Basic Earnings per Share Net Loss available to common shareholders $ (484,959) 10,375,000 $ (0.05) ============ Stock Options -- 112,769 ------------ ------------ Diluted Earnings per Share Net Loss available to common shareholders plus assumed conversions $ (484,959) 10,487,769 $ (0.05) ============ ============ ============
-6- 8
For the Three Months Ended March 31,1999 ---------------------------------------------------- Per-Share Income Shares Amount ------------ ---------- ------------ Net Loss before cumulative effect of change in accounting principle $ (552,623) Less: Dividends and accretion on preferred stock (788,843) ------------ Basic Earnings per Share before cumulative change in accounting principle Net Loss available to common shareholders $ (1,341,466) 10,375,000 $ (0.13) ============ Stock Options -- -- ------------ ------------ Diluted Earnings per Share before cumulative effect of change in accounting principle Net Loss available to common shareholders plus assumed conversions $ (1,341,466) 10,375,000 $ (0.13) ============ ============ ============ Cumulative effect of change in accounting principle $ (77,731) Basic Earnings per Share of cumulative effect of change in accounting principle Net Loss available to common shareholders $ (77,731) 10,375,000 $ (0.01) ============ ========== ============ Stock Options -- -- ------------ ------------ Diluted Earnings per Share of cumulative effect of change in accounting principle Net Loss available to common shareholders plus assumed conversions $ (77,731) 10,375,000 $ (0.01) ============ ============ ============ Net Loss $ (630,354) Less: Dividends and accretion on preferred stock (788,843) ------------ Basic Earnings per Share Net Loss available to common shareholders $ (1,419,197) 10,375,000 $ (0.14) ============ Stock Options -- -- ------------ ------------ Diluted Earnings per Share Net Loss available to common shareholders plus assumed conversions $ (1,419,197) 10,375,000 $ (0.14) ============ ============ ============
Net income (loss) per common share has been computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the periods. The Company had outstanding 250,000 and 443,500 stock options and 1,000,000 warrants, during the three months ended March 31, 1998 and 1999, respectively, which were antidilutive and were not included in the calculation because the exercise price of these instruments exceeded the underlying market value of the options and warrants. 4. FINANCING ARRANGEMENTS: In connection with the Offering, the Company entered into an amended revolving credit agreement with Compass Bank (the "Company Credit Facility"), to provide for a maximum loan amount of $25 million, subject to borrowing base limitations. The maximum loan amount was amended to $10 million in April, 1999. Under the Company Credit Facility, the principal outstanding is due and payable upon maturity in June 2000 with interest due monthly. The Company Credit Facility was subsequently amended in September 1998 to provide for a term loan under the facility (the "Term Loan") in addition to the revolving credit facility limited by the Company's borrowing base. The Term Loan was initially due and payable upon maturity in September 1999. The interest rate for borrowings is calculated at a floating rate based on the 9 Compass index rate or LIBOR plus 2 percent. The Company's obligations are secured by certain of its oil and gas properties and cash or cash equivalents included in the borrowing base. Under the Company Credit Facility, Compass, in its sole discretion, will make semiannual borrowing base determinations based upon the proved oil and natural gas properties of the Company. Compass may redetermine the borrowing base and the monthly borrowing base reduction at any time and from time to time. The Company may also request borrowing base redeterminations in addition to its required semiannual reviews at the Company's cost. As of March 31, 1999 and December 31, 1998, respectively, the borrowing base was $6,171,738 and $6,076,000 and borrowings outstanding were $5,351,000 and $5,056,000. Proceeds from the Borrowing Base portions of this credit facility have been used to provide funding for exploration and development activity. Substantially all of Carrizo's oil and natural gas property and equipment is pledged as collateral under this facility. At March 31, 1999 and December 31, 1998, borrowings under this facility totaled $5,351,000 and $5,056,000, respectively, with an additional $521,738 and $1,020,000, respectively, available for future borrowings. Borrowings outstanding under the Term Loan portion of the facility were $9,000,000 and $7,000,000 at March 31, 1999 and December 31, 1998, respectively. The facility was also available for letters of credit, two and one of which have been issued for $299,000 and $224,000 at March 31, 1999 and December 31, 1998, respectively. The term loan is guaranteed by certain members of the Board of Directors. The Company is subject to certain covenants under the terms of the Company Credit Facility, including, but not limited to, (a) maintenance of specified tangible net worth and (b) maintenance of a ratio of quarterly cash flow (net income plus depreciation and other noncash charges, less noncash income) to quarterly debt service (payments made for principal in connection with the credit facility plus payments made for principal other than in connection with such credit facility) of no less than 1.25 to 1.00. The Company Credit Facility also places restrictions on, among other things, (a) incurring additional indebtedness, loans and liens, (b) changing the nature of business or business structure, (c) selling assets and (d) paying dividends. In March 1999, the Company Credit Facility was amended to decrease the required specified tangible net worth covenant. In March 1999, the Company borrowed an additional $2 million on the term loan portion of the Company Credit Facility increasing the total outstanding borrowing under the Term Loan to $9 million. Certain members of the Board of Directors have guaranteed the Term Loan. The maturity date of the Term Loan was amended to provide for twelve monthly installments of $750,000 beginning January 1, 2000. The Company also received a deferral of principal payments due under the borrowing base facility until July 1, 1999. At such time, the available borrowing base portion of the loan will be reviewed and is expected to begin to reduce ratably at $325,000 per month with any difference between the available borrowing base and amounts outstanding being currently due. Should the Company be able to add sufficient value to its borrowing base through drilling activities, the required principal payments would be reduced. Certain members of the Board of Directors have provided $2 million in collateral primarily in the form of marketable securities to secure the borrowing base facility. 5. MANDATORILY REDEEMABLE PREFERRED STOCK: In January 1998, the Company consummated the sale of 300,000 shares of Preferred Stock and Warrants to purchase 1,000,000 shares of Common Stock to affiliates of Enron Corp. The net proceeds received by the Company from this transaction were approximately $28.8 million and were used primarily for oil and natural gas exploration and development activities in Texas and Louisiana and to repay related indebtedness. The Preferred Stock provides for annual cumulative dividends of $9.00 per share, payable quarterly in cash or, at the option of the Company until January 15, 2002, in additional shares of Preferred Stock. The Company expects to continue payment in kind dividends due in 1999. Dividend payments for the three months ended March 31, 1999 were made by the issuance of an additional 7,337.02 shares of Preferred Stock. As of April 15, 1999 there were 334,623.71 shares of Preferred Stock outstanding. The Preferred Stock is required to be redeemed by the Company (i) on January 8, 2005, or (ii) after a request for redemption from the holders of at least 30,000 shares of the Preferred Stock (or, if fewer than such number of shares of Preferred Stock are outstanding, all of the outstanding shares of Preferred Stock) and the occurrence of the following events: (a) the Company has failed at any point in time to declare and pay any two dividends in the amount then due and payable on or before the date the second of such dividends is due and such dividends remain unpaid at such time, (b) the Company breaches certain other covenants concerning the payment of dividends or other distributions on or redemption or acquisition of shares of its capital stock ranking at parity with or junior to the Preferred Stock, (c) for two consecutive fiscal quarterly periods the quarterly Cash Flow (as defined below) of the Company is less than the amount of the dividends accrued in respect to the Preferred Stock, (d) the Company fails to pay certain amounts due on indebtedness for borrowed money or there has otherwise been an acceleration of such indebtedness for borrowed money, (e) there is a -8- 10 violation of the Shareholders' Agreement that is not waived or (f) the Company sells, leases, exchanges or otherwise disposes of all or substantially all of its property and assets which transaction does not provide for the redemption of the Series A Preferred Stock. "Cash Flow" means net income prior to preferred dividends and accretion (i) plus (to the extent included in net income prior to preferred dividends and accretion) depreciation, depletion and amortization and other non-cash charges and losses on the sale of property (ii) minus non-cash income items and required principal payments on indebtedness for borrowed money with a maturity from the original date of incurrence of such indebtedness of six months or greater (excluding voluntary prepayments and refinancing, but including prepayments (other than in connection with refinancing) which would otherwise be due under such indebtedness within a 60-day period following the date of such prepayment). The Preferred Stock also may be redeemed at the option of the Company at any time in whole or in part. All redemptions are at a price per share, together with dividends accumulated and unpaid to the date of redemption, decreasing over time from an initial rate of $104.50 per share to $100.00 per share. If the Company fails to meet its redemption obligations, the holders of the Preferred Stock will generally have the right, voting separately as a class, to elect additional directors, which in most cases will constitute a majority of the board. The Company's Cash Flow (as defined above) for the three months ended March 31, 1999 was less than the amount of the dividends accrued with respect to the Preferred Stock for such period. There can be no assurance as to whether the Company's Cash Flow for the three months ended June 30, 1999 will exceed the amount of the dividends to be accrued with respect to the Preferred Stock. 6. CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE: On January 1, 1999, the Company adopted the American Institute of Certified Public Accountants Statement of Position 98-5, which provides guidance on the accounting for start up costs and organization costs that required the recording of the cumulative effect of a change in accounting principle to write off unamortized organization costs of $77,731. 7. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS: In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities". The Statement establishes accounting and reporting standards requiring that every derivative instrument, including certain derivative instruments embedded in other contracts, be recorded in the balance sheet as either an asset or liability measured at its fair value. The Statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. Statement No. 133 is effective for fiscal years beginning after June 15, 1999. A company may also implement the Statement as of the beginning of any fiscal quarter after issuance. Statement No. 133 cannot be applied retroactively. Statement No. 133 must be applied to (a) derivative instruments and (b) certain derivative instruments embedded in hybrid contracts that were issued, acquired, or substantively modified after December 31, 1997 and, at the company's election, before January 1, 1998. The Company routinely enters into financial instrument contracts to hedge price risks associated with the sale of crude oil and natural gas. Statement No. 133 amends, modifies and supercedes significantly all of the authoritative literature governing the accounting for and disclosure of derivative financial instruments and hedging activities. As a result, adoption of Statement No. 133 will impact the accounting for and disclosure of the Company's operations. The Company is assessing the impact Statement No. 133 will have on its financial accounting and disclosures and intends to adopt the provisions of such statement in accordance with the requirements provided by the statement. -9- 11 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is management's discussion and analysis of certain significant factors that have affected certain aspects of the Company's financial position and results of operations during the periods included in the accompanying unaudited condensed financial statements. This discussion should be read in conjunction with the discussion under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the annual financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1998 and the unaudited condensed financial statements included elsewhere herein. Unless otherwise indicated by the context, references herein to "Carrizo" or "Company" mean Carrizo Oil & Gas, Inc., a Texas corporation that is the registrant. GENERAL OVERVIEW The Company began operations in September 1993 and initially focused on the acquisition of producing properties. As a result of the increasing availability of economic onshore 3-D seismic surveys, the Company began to obtain 3-D seismic data and options to lease substantial acreage in 1995 and began to drill its 3-D based prospects in 1996. The Company drilled 53 wells in 1998 and five wells through the three months ended March 31, 1999. The Company has budgeted to drill a total of 18 to 44 gross wells (4.6 to 17.5 net) in 1999. Accordingly, depreciation, depletion and amortization, oil and gas operating expenses and production are expected to increase. The Company has typically retained the majority of its interests in shallow, normally pressured prospects and sold a portion of its interests in deeper, overpressured prospects. The Company has primarily grown through the internal development of properties within its exploration project areas, although the Company acquired properties with existing production in the Camp Hill Project in late 1993, the Encinitas Project in early 1995 and the La Rosa Project in 1996. The Company made these acquisitions through the use of limited partnerships with Carrizo or Carrizo Production, Inc. as the general partner. However, as operations have expanded, the Company has increasingly funded its activities through bank borrowings and cash flow from operations in order to retain a greater portion of the interests it develops. The Company's revenues, profitability, future growth and ability to borrow funds or obtain additional capital, and the carrying value of its properties are substantially dependent on the success of the Company's exploration program and the prevailing prices of oil and natural gas. It is impossible to predict future oil and natural gas price movements with certainty. Declines in prices received for oil and natural gas may have an adverse effect on the Company's financial condition, liquidity, ability to finance capital expenditures, and results of operations. Lower prices may also impact the amount of reserves that can be produced economically by the Company. Due to the instability of oil and natural gas prices, in 1995 the Company began utilizing, from time to time, certain hedging instruments (e.g., NYMEX futures contracts) for a portion of its oil and gas production to achieve a more predictable cash flow, as well as to reduce the exposure to price fluctuations. The Company's hedging arrangements apply to only a portion of its production, provide only partial price protection against declines in oil and natural gas prices and limit potential gains from future increases in prices. Such hedging arrangements may expose the Company to risk of financial loss in certain circumstances, including instances where production is less than expected, the Company's customers fail to purchase contracted quantities of oil or natural gas, or a sudden unexpected event materially impacts oil or natural gas prices. The Company accounts for all these transactions as hedging activities and, accordingly, gains and losses from hedging activities are included in oil and gas revenues during the period the hedged transactions occur. Historically, gains and losses from hedging activities have not been material. The Company expects that the amount of hedges that it has in place will vary from time to time. The Company entered in hedging transactions covering 660 Mmcf and 180 Mmcf at an average price (Houston Ship Channel) of $2.13 and $2.99 resulting in a net gain of $117,000 and $150,000 for the first quarters of 1999 and 1998, respectively. The Company had outstanding hedge positions as of March 31, 1999 and 1998, respectively, covering 1,080 Mmcf for April-December 1999 and 488 Mmcf for April-July 1998 at an average price of $1.93 and $2.15 (Houston Ship Channel). The Company also had outstanding hedge positions as of March 31, 1999 covering 54,000 Bbls for April-December 1999 at an average price of $15.45. The fair market value of the hedge positions as March 31, 1999 is approximately $(30,000). The Company uses the full-cost method of accounting for its oil and gas properties. Under this method, all acquisition, exploration and development costs, including any general and administrative costs that are directly attributable to the Company's acquisition, exploration and development activities, are capitalized in a "full-cost pool" as incurred. The Company records depletion of its full-cost pool using the unit-of-production method. To the extent that such capitalized -10- 12 costs in the full-cost pool (net of depreciation, depletion and amortization and related deferred taxes) exceed the present value (using a 10 percent discount rate) of estimated future net after-tax cash flows from proved oil and gas reserves, such excess costs are charged to operations. A ceiling test write-down was not required for the three months ended March 31, 1999 and 1998. Once incurred, a write-down of oil and gas properties is not reversible at a later date. RESULTS OF OPERATIONS Three Months Ended March 31, 1999, Compared to the Three Months Ended March 31, 1998 Oil and natural gas revenues for the three months ended March 31, 1999 decreased 21 percent to $1,842,000 from $2,339,000 for the same period in 1998. Production volumes for natural gas during the three months ended March 31, 1999 were 703,694 Mcf, essentially unchanged from 707,171 Mcf for the same period in 1998. Average gas prices decreased 27 percent to $1.92 per Mcf in the first quarter of 1999 from $2.64 per Mcf in the same period in 1998. Production volumes for oil in the first quarter of 1999 increased 44 percent to 47,759 Bbls from 33,175 Bbls for the same period in 1998. Average oil prices decreased 27 percent to $10.33 per barrel in the first quarter of 1999 from $14.19 per barrel in the same period in 1998. The increase in oil production was due primarily to the Jones Branch acquisition during the fourth quarter of 1998. Natural gas production remained substantially unchanged primarily as a result of the increased production due to the Jones Branch acquisition offset by the natural decline of existing wells. The following table summarizes production volumes, average sales prices and operating revenues for the Company's oil and natural gas operations for the three months ended March 31, 1998 and 1999:
1999 Period Compared to 1998 Period -------------------------------- March 31 Increase % Increase 1998 1999 (Decrease) (Decrease) ------------ ------------ ------------ --------- Production volumes- Oil and condensate (Bbls) 33,175 47,759 14,584 44% Natural gas (Mcf) 707,171 703,694 (3,477) 0% Average sales prices-(1) Oil and condensate (per Bbl) $ 14.19 $ 10.33 $ (3.86) (27)% Natural gas (per Mcf) 2.64 1.92 (.72) (27)% Operating revenues- Oil and condensate $ 470,689 $ 493,436 $ 22,747 5% Natural gas 1,868,193 1,348,878 (519,315) (28)% ------------ ------------ ------------ Total $ 2,338,882 $ 1,842,314 $ (496,568) (21)% ============ ============ ============
- --------- (1) Includes impact of hedging activities. Oil and natural gas operating expenses for the three months ended March 31, 1999 increased 18 percent to $744,000 from $629,000 for the same period in 1998 primarily due to the addition of new production offset by a reduction in costs on older producing fields. Operating expenses per equivalent unit increased to $.75 per Mcfe in the first quarter of 1999 from $.69 per Mcfe in the same period in 1998 as a result of the natural decrease in production of natural gas on older wells offset by cost control measures implemented in certain oil producing fields. Depreciation, depletion and amortization (DD&A) expense for the three months ended March 31, 1999 increased 24 percent to $943,000 from $760,000 for the same period in 1998. This increase was due to increased amortization of deferred loan costs, increased production and additional seismic and drilling costs offset by the lower asset base resulting from the ceiling test write-down in the fourth quarter of 1998. General and administrative expense for the three months ended March 31, 1999 decreased 15 percent to $708,000 from $834,000 for the same period in 1998 primarily as a result of cost control measures implemented in the first quarter of 1999. Interest income for the three months ended March 31, 1999 decreased to $6,000 from $194,000 in the first quarter of 1998 as a result of declining cash balances Net interest expense for the three months ended March 31, 1999, decreased to zero from $3,000 from in the same period in 1998. Capitalized interest increased to $260,000 in the first quarter of 1999 from $55,000 in the first quarter of 1998 reflecting higher debt levels in the 1999 quarter. -11- 13 Income (loss) before income taxes for the three months ended March 31, 1999 decreased to a loss of $546,000 from income of $306,000 in the same period in 1998. Net income (loss) for the three months ended March 31, 1999 decreased to a loss of $630,000 from income of $186,000 for the same period in 1998 primarily as a result of the factors described above and the charge of $78,000 for the cumulative effect of change in method of reporting costs of start-up activities. LIQUIDITY AND CAPITAL RESOURCES Note 2 to the Financial Statements notes that the financial statements have been prepared assuming the Company will continue as a going concern but also notes the uncertainties about the Company's future ability to pay its obligations when they become due and the lack of firm commitments for additional capital raised substantial doubt about the ability of the Company to continue as a going concern. As stated in that note, the financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern. See Note 2 in the Notes to the Company's Financial Statements. The Company has made and will be required to make oil and gas capital expenditures substantially in excess of its net cash flow from operations in order to complete the exploration and development of its existing properties. The Company will require additional sources of financing to fund drilling expenditures on properties currently owned by the Company and to fund leasehold costs and geological and geophysical cost on its active exploration projects. Management of the Company continues to seek financing for its capital program from a variety of sources. The Company is seeking common or preferred equity investors. The Company is also seeking additional debt financing, although it has no additional borrowings currently available under its credit agreement. No assurance can be given that the Company will be able to obtain additional financing by these or other means on terms that would be acceptable to the Company. The Company's inability to obtain additional financing would have a material adverse effect on the Company. Without raising additional capital, the Company anticipates that it will be required to limit or defer its planned oil and gas exploration and development program, which could adversely affect the recoverability and ultimate value of the Company's oil and gas properties. The Company may also be required to pursue other financial alternatives, which could include sales of assets or a sale or merger of the Company. The Company's primary sources of liquidity have included proceeds from the Offering and from the sale of shares of Preferred Stock and the Warrants, funds generated by operations, equity capital contributions and borrowings, primarily under revolving credit facilities. Cash flows used in operations (after changes in working capital) were $3,454,606 and $559,418 for the three months ended March 31, 1998 and 1999, respectively. The decrease in cash flows used in operations in 1999 as compared to 1998 was due primarily to decreases in trade accounts payable in 1998. The Company has budgeted capital expenditures in 1999 of approximately $2.2 million to $9.5 million of which $500,000 is expected to be used to fund 3-D seismic surveys and land acquisitions and $1.7 million to $ 9.0 million of which is expected to be used for drilling activities in the Company's project areas. The Company has budgeted to drill approximately 18 to 44 gross wells (4.6 to 17.8 net) in 1999. The actual number of wells drilled and capital expended is dependent upon available financing and cash flow. This decrease in planned drilling activity resulted primarily from the lack of availability of capital resources. The Company has continued to reinvest a substantial portion of its cash flows into increasing its 3-D prospect portfolio, improving its 3-D seismic interpretation technology and funding its drilling program. Oil and gas capital expenditures were $1.9 million for the three months ended March 31, 1999. The Company's drilling efforts resulted in the successful completion of 31 gross wells (10.3 net) during the year ended December 31, 1998 and five gross wells (0.7 net) during the three months ended March 31, 1999. -12- 14 FINANCING ARRANGEMENTS In connection with the Offering, the Company entered into an amended revolving credit agreement with Compass Bank (the "Company Credit Facility"), to provide for a maximum loan amount of $25 million, subject to borrowing base limitations. The maximum borrowing base loan amount was amended to $10 million in April, 1999. Under the Company Credit Facility, the principal outstanding is due and payable upon maturity in June 2000 with interest due monthly. The Company Credit Facility was subsequently amended in September 1998 to provide for a term loan under the facility (the "Term Loan") in addition to the revolving credit facility limited by the Company's borrowing base. The Term Loan was initially due and payable upon maturity in September 1999. The interest rate for borrowings is calculated at a floating rate based on the Compass index rate or LIBOR plus 2 percent. The Company's obligations are secured by certain of its oil and gas properties and cash or cash equivalents included in the borrowing base. Under the Company Credit Facility, Compass, in its sole discretion, will make semiannual borrowing base determinations based upon the proved oil and natural gas properties of the Company. Compass may redetermine the borrowing base and the monthly borrowing base reduction at any time and from time to time. The Company may also request borrowing base redeterminations in addition to its required semiannual reviews at the Company's cost. As of March 31, 1999 and December 31, 1998, respectively, the borrowing base was $5,790,925 and $6,076,000 and borrowings outstanding were $6,171,738 and $5,056,000. Proceeds from the Borrowing Base portions of this credit facility have been used to provide funding for exploration and development activity. Substantially all of Carrizo's oil and natural gas property and equipment is pledged as collateral under this facility. At March 31, 1999 and December 31, 1998 borrowings under this facility totaled $5,351,000 and $5,056,000, respectively, with and an additional $521,738 and $1,020,000, respectively, available for future borrowings. Borrowings outstanding under the Term Loan portion of the facility were $9,000,000 and $7,000,000 at March 31, 1999 and December 31, 1998, respectively. The facility was also available for letters of credit, two and one of which have been issued for $299,000 and $224,000 at March 31, 1999 and December 31, 1998, respectively. The term loan is guaranteed by certain members of the Board of Directors. The Company is subject to certain covenants under the terms of the Company Credit Facility, including, but not limited to, (a) maintenance of specified tangible net worth and (b) maintenance of a ratio of quarterly cash flow (net income plus depreciation and other noncash charges, less noncash income) to quarterly debt service (payments made for principal in connection with the credit facility plus payments made for principal other than in connection with such credit facility) of no less than 1.25 to 1.00. The Company Credit Facility also places restrictions on, among other things, (a) incurring additional indebtedness, loans and liens, (b) changing the nature of business or business structure, (c) selling assets and (d) paying dividends. In March 1999, the Company Credit Facility was amended to decrease the required specified tangible net worth covenant. In March 1999, the Company borrowed an additional $2 million on the term loan portion of the Company Credit Facility increasing the total outstanding borrowing under the Term Loan to $9 million. Certain members of the Board of Directors have guaranteed the Term Loan. The maturity date of the Term Loan was amended to provide for twelve monthly installments of $750,000 beginning January 1, 2000. The Company also received a deferral of principal payments due under the borrowing base facility until July 1, 1999. At such time, the available borrowing base portion of the loan will be reviewed and is expected to begin to reduce ratably at $325,000 per month with any difference between the available borrowing base and amounts outstanding being currently due. Should the Company be able to add sufficient value to its borrowing base through drilling activities, the required principal payments would be reduced. Certain members of the Board of Directors have provided $2 million in collateral primarily in the form of marketable securities to secure the borrowing base facility. In January 1998, the Company consummated the sale of 300,000 shares of Preferred Stock and Warrants to purchase 1,000,000 shares of Common Stock to affiliates of Enron Corp. The net proceeds received by the Company from this transaction were approximately $28.8 million and were used primarily for oil and natural gas exploration and development activities in Texas and Louisiana and to repay related indebtedness. The Preferred Stock provides for annual cumulative dividends of $9.00 per share, payable quarterly in cash or, at the option of the Company until January 15, 2002, in additional shares of Preferred Stock. The Company expects to continue payment in kind dividends due in 1999. Dividend payments for the three months ended December 31, 1999 were made by the issuance of an additional 7,337.02 shares of Preferred Stock. As of April 15, 1999 there were 334,623.71 shares of Preferred Stock outstanding. The Preferred Stock is required to be redeemed by the Company (i) on January 8, 2005, or (ii) after a request for redemption from the holders of at least 30,000 shares of the Preferred Stock (or, if fewer than such number of shares of Preferred Stock are outstanding, all of the outstanding shares of Preferred Stock) and the occurrence of the following -13- 15 events: (a) the Company has failed at any point in time to declare and pay any two dividends in the amount then due and payable on or before the date the second of such dividends is due and such dividends remain unpaid at such time, (b) the Company breaches certain other covenants concerning the payment of dividends or other distributions on or redemption or acquisition of shares of its capital stock ranking at parity with or junior to the Preferred Stock, (c) for two consecutive fiscal quarterly periods the quarterly Cash Flow (as defined below) of the Company is less than the amount of the dividends accrued in respect to the Preferred Stock, (d) the Company fails to pay certain amounts due on indebtedness for borrowed money or there has otherwise been an acceleration of such indebtedness for borrowed money, (e) there is a violation of the Shareholders' Agreement that is not waived or (f) the Company sells, leases, exchanges or otherwise disposes of all or substantially all of its property and assets which transaction does not provide for the redemption of the Series A Preferred Stock. "Cash Flow" means net income prior to preferred dividends and accretion (i) plus (to the extent included in net income prior to preferred dividends and accretion) depreciation, depletion and amortization and other non-cash charges and losses on the sale of property (ii) minus non-cash income items and required principal payments on indebtedness for borrowed money with a maturity from the original date of incurrence of such indebtedness of six months or greater (excluding voluntary prepayments and refinancing, but including prepayments (other than in connection with refinancing) which would otherwise be due under such indebtedness within a 60-day period following the date of such prepayment). The Preferred Stock also may be redeemed at the option of the Company at any time in whole or in part. All redemptions are at a price per share, together with dividends accumulated and unpaid to the date of redemption, decreasing over time from an initial rate of $104.50 per share to $100.00 per share. If the Company fails to meet its redemption obligations, the holders of the Preferred Stock will generally have the right, voting separately as a class, to elect additional directors, which in most cases will constitute a majority of the board. The Company's Cash Flow (as defined above) for the three months ended March 31, 1999 was less than the amount of the dividends accrued with respect to the Preferred Stock for such period. There can be no assurance as to whether the Company's Cash Flow for the three months ended June 30, 1999 will exceed the amount of the dividends to be accrued with respect to the Preferred Stock. EFFECTS OF INFLATION AND CHANGES IN PRICE The Company's results of operations and cash flows are affected by changing oil and gas prices. If the price of oil and gas increases (decreases), there could be a corresponding increase (decrease) in the operating cost that the Company is required to bear for operations, as well as an increase (decrease) in revenues. Inflation has had a minimal effect on the Company. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities". The Statement establishes accounting and reporting standards requiring that every derivative instrument, including certain derivative instruments embedded in other contracts, be recorded in the balance sheet as either an asset or liability measured at its fair value. The Statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. Statement No. 133 is effective for fiscal years beginning after June 15, 1999. A company may also implement the Statement as of the beginning of any fiscal quarter after issuance. Statement No. 133 cannot be applied retroactively. Statement No. 133 must be applied to (a) derivative instruments and (b) certain derivative instruments embedded in hybrid contracts that were issued, acquired, or substantively modified after December 31, 1997 and, at the company's election, before January 1, 1998. The Company routinely enters into financial instrument contracts to hedge price risks associated with the sale of crude oil and natural gas. Statement No. 133 amends, modifies and supercedes significantly all of the authoritative literature governing the accounting for and disclosure of derivative financial instruments and hedging activities. As a result, adoption of Statement No. 133 will impact the accounting for and disclosure of the Company's operations. The Company is assessing the impact Statement No. 133 will have on its financial accounting and disclosures and intends to adopt the provisions of such statement in accordance with the requirements provided by the statement. YEAR 2000 The "Year 2000 Issue" is a general term used to refer to certain business implications of the arrival of the new millennium. In simple terms, on January 1, 2000, all computerized systems that use the two-digit convention to identify -14- 16 the applicable year, including both information technology systems and non-information technology systems that use embedded technology, could fail completely or create erroneous data as a result of the system failing to recognize the two digit internal date "00" as representing the year 2000. The Company has completed its initial assessment of Year 2000 compliance of its internal information technology systems, which consist primarily of financial and accounting systems and geological evaluation systems, and does not believe that these systems have any material issues with respect to Year 2000 compliance. The Company's internal information technology systems are all new and widely utilized. Its vendors have advised the Company that all of these systems are either Year 2000 compliant or can be easily upgraded to be Year 2000 compliant. The Company anticipates that its Year 2000 remediation efforts for information technology systems, consisting primarily of software upgrades, will continue through 1999, and anticipates incurring less than $10,000 in connection with these efforts. The Company has not identified any non-information technology systems that use embedded technology on which it relies and which it believes is likely to have a Year 2000 problem; however such assessment is expected to continue through 1999. Like every other business enterprise, the Company is at risk from Year 2000 failures on the part of its major business counterparts, including suppliers and service providers, as well as potential failures in public and private infrastructure services, including electricity, water, gas, transportation and communications. Through communications with industry partners and others, the Company is also evaluating the risk presented by potential Year 2000 non-compliance of third parties. Because such risks vary substantially, companies are being contacted based on the estimated magnitude of the risk posed to the Company by their potential Year 2000 non-compliance. The Company anticipates that these efforts will continue through 1999 and will not result in significant costs to the Company. The Company's assessment of its Year 2000 issues involves many assumptions. There can be no assurance that the Company's assumptions will prove accurate, and actual results could differ significantly from the assumptions. In conducting its Year 2000 compliance efforts, the Company has relied primarily on vendor representations with respect to its internal computerized systems and representations from third parties with which the Company has business relationships and has not independently verified these representations. There can be no assurance that these representations will prove to be accurate. A Year 2000 failure could result in a business disruption that adversely affects the Company's business, financial condition or results of operations. The Company is unlikely to be insured for Year 2000 losses should they occur. Although it is not currently aware of any likely business disruption, the Company is developing contingency plans to address Year 2000 failures and expects this work to continue through 1999. -15- 17 PART II. OTHER INFORMATION Item 1 - Legal Proceedings From time to time the Company is a party to various legal proceedings arising in the ordinary course of business. The Company is not currently a party to any litigation that it believes could have a material adverse effect on the financial position of the Company. Item 2 - Changes in Securities and Use of Proceeds None Item 3 - Defaults Upon Senior Securities None Item 4 - Submission of Matters to a Vote of Security Holders None Item 5 - Other Information FORWARD LOOKING STATEMENTS The statements contained in all parts of this document, including, but not limited to, those relating to the Company's schedule, targets, estimates or results of future drilling, budgeted wells, increases in wells, budgeted and other future capital expenditures, use of offering proceeds, effects of litigation, expected production or reserves, increases in reserves, acreage working capital requirements, hedging activities, the ability of expected sources of liquidity to implement its business strategy, and any other statements regarding future operations, financial results, business plans and cash needs and other statements that are not historical facts are forward looking statements. When used in this document, the words "anticipate," "estimate," "expect," "may," "project," "believe" and similar expression are intended to be among the statements that identify forward looking statements. Such statements involve risks and uncertainties, including, but not limited to, those relating to the Company's dependence on its exploratory drilling activities, the volatility of oil and natural gas prices, the need to replace reserves depleted by production, operating risks of oil and natural gas operations, the Company's dependence on its key personnel, factors that affect the Company's ability to manage its growth and achieve its business strategy, risks relating to, limited operating history, technological changes, significant capital requirements of the Company, the potential impact of government regulations, litigation, competition, the uncertainty of reserve information and future net revenue estimates, property acquisition risks and other factors detailed in the Registration Statement and the Company's other filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. Item 6 - Exhibits and Reports on Form 8-K Exhibits Exhibit Number Description ------ ----------- +2.1 -- Combination Agreement by and among the Company, Carrizo Production, Inc., Encinitas Partners Ltd., La Rosa Partners Ltd., Carrizo Partners Ltd., Paul B. Loyd, Jr., Steven A. Webster, S.P. Johnson IV, Douglas A.P. Hamilton and Frank A. Wojtek dated as of June 6, 1997 (Incorporated herein by reference to Exhibit 2.1 to the Company's Registration Statement on Form S-1 (Registration No. 333-29187)). +3.1 -- Amended and Restated Articles of Incorporation of the Company (Incorporated herein by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997. -16- 18 +3.2 -- Statement of Resolution Establishing Series of Shares Designated 9% Series A Preferred Stock (Incorporated herein by reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997). +3.3 -- Amended and Restated Bylaws of the Company, as amended by Amendment No. 1 (incorporated herein by reference to Exhibit 3.2 to the Company's Registration Statement on Form 8-A (Registration No. 000-22915). 4.1 -- Fifth Amended, Restated, and Combined Loan Agreement between the Company and Compass Bank dated May 22, 1999. 4.2 -- Amended and Restated Limited Guaranty, Douglas A. P. Hamilton dated May 22, 1999. 4.3 -- Stock Pledge Agreement, Steven A. Webster dated May 22, 1999. 4.4 -- Sixth Amendment to First Amended, Restated and Combined Loan Agreement by and between Carrizo Oil & Gas, Inc. and Compass Bank dated April 23, 1999. 4.5 -- Amended and Restated Limited Guaranty, Paul B. Loyd, Jr. dated May 22, 1999. 27.1 -- Financial Data Schedule. + Incorporated herein by reference as indicated. Reports on Form 8-K On February 23, 1999, the Company filed a Form 8-K/A that included financial statements and pro forma financial information with respect to its acquisition of certain oil and gas producing properties in Wharton County, Texas, along with certain rights to participate in certain exploration prospects and associated rights of access to certain seismic data and related information and certain other related assets from Hall-Houston Oil Company and others. This acquisition was originally reported on a Form 8-K, filed on December 28, 1998. -17- 19 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. Carrizo Oil & Gas, Inc. (Registrant) Date: May 17, 1999 By: /s/ S. P. Johnson, IV -------------------------------------------- President and Chief Executive Officer (Principal Executive Officer) Date: May 17, 1999 By: /s/ Frank A. Wojtek -------------------------------------------- Chief Financial Officer (Principal Financial and Accounting Officer) -18- 20 EXHIBIT INDEX
Exhibit Number Description ------ ----------- +2.1 -- Combination Agreement by and among the Company, Carrizo Production, Inc., Encinitas Partners Ltd., La Rosa Partners Ltd., Carrizo Partners Ltd., Paul B. Loyd, Jr., Steven A. Webster, S.P. Johnson IV, Douglas A.P. Hamilton and Frank A. Wojtek dated as of June 6, 1997 (Incorporated herein by reference to Exhibit 2.1 to the Company's Registration Statement on Form S-1 (Registration No. 333-29187)). +3.1 -- Amended and Restated Articles of Incorporation of the Company (Incorporated herein by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997. +3.2 -- Statement of Resolution Establishing Series of Shares Designated 9% Series A Preferred Stock (Incorporated herein by reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997). +3.3 -- Amended and Restated Bylaws of the Company, as amended by Amendment No. 1 (incorporated herein by reference to Exhibit 3.2 to the Company's Registration Statement on Form 8-A (Registration No. 000-22915). 4.1 -- Fifth Amended, Restated, and Combined Loan Agreement between the Company and Compass Bank dated March 22, 1999. 4.2 -- Amended and Restated Limited Guaranty, Douglas A. P. Hamilton dated March 22, 1999. 4.3 -- Stock Pledge Agreement, Steven A. Webster dated March 22, 1999. 4.4 -- Sixth Amendment to First Amended, Restated and Combined Loan Agreement by and between Carrizo Oil & Gas, Inc. and Compass Bank dated April 23, 1999. 4.5 -- Amended and Restated Limited Guaranty, Paul B. Loyd, Jr. dated March 22, 1999. 27.1 -- Financial Data Schedule.
+ Incorporated herein by reference as indicated. EX-4.1 2 FIFTH AMENDED & COMBINED LOAN AGREEMENT 1 EXHIBIT 4.1 FIFTH AMENDMENT TO FIRST AMENDED, RESTATED, AND COMBINED LOAN AGREEMENT BY AND BETWEEN CARRIZO OIL & GAS, INC. AND COMPASS BANK This Fifth Amendment to the Loan Agreement (this "Fifth Amendment") by and between CARRIZO OIL & GAS, INC., a Texas corporation (the "Borrower"), and COMPASS BANK, a Texas chartered bank (the "Bank"), is entered into effective on the 22nd day of March 1999, and shall be effective as of that date for all purposes. W I T N E S S E T H: Borrower and Bank entered into a First Amended, Restated, and Combined Loan Agreement dated August 28, 1997, as amended by the First Amendment thereto dated December 23, 1997, the Second Amendment thereto dated December 30, 1997, the Third Amendment thereto dated July 30, 1998 and the Fourth Amendment thereto dated September 24, 1998 (collectively, the "Loan Agreement"). Capitalized terms used, but not defined herein, shall have the meanings prescribed therefor in the Loan Agreement. Borrower has requested that Bank increase the existing term loan to Borrower by $2,000,000.00 up to a principal amount of $9,000,000.00, extend the maturity date of the term loan and modify the Borrowing Base supporting the Revolving Loan, and Bank has agreed to do so according to the terms set forth herein, which shall be incorporated into the Loan Agreement. NOW, THEREFORE, in consideration of the mutual promises herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged by Borrower and Bank, and each intending to be legally bound hereby, the parties agree as follows: I. Specific Amendments to Loan Agreement. Article I of the Loan Agreement is hereby amended by revising the following defined terms in their entirety to read as follows: "Borrowing Base Properties" means the Borrowing Base Oil and Gas Properties, the Borrowing Base Cash, and the Borrowing Base Securities. "Cash Equivalent" means certificates of deposit issued by the Bank, other certificates of deposit approved by the Bank in its sole discretion and Collateral Letters of Credit "Notes" means, collectively, the Note and the Second Term Note and any extension, renewal, rearrangement of, or substitute for either of such Notes. All references to the 1 2 defined term, "Note," throughout this Agreement, as it existed prior to the Second Amendment, shall be construed to refer to both of the Notes, with the exception of the references to the term, "Note," in the definitions of Loan Excess, and Note, and in Sections 2.01 through 2.03, 2.08, 2.09, 3.01, 3.04 and Exhibit "B" of the Loan Agreement, all of which shall remain singular and shall be construed to refer to the Note evidencing the Revolving Loan. "Subsidiary" means, with respect to Borrower and Guarantor, respectively, (a) any corporation in which Borrower or Guarantor, directly or indirectly through its Subsidiaries, owns more than fifty percent (50%) of the stock of any class or classes having by the terms thereof the ordinary voting power to elect a majority of the directors of such corporation; and (b) any partnership, association, joint venture, or other entity in which Borrower or Guarantor, respectively, directly or indirectly through its Subsidiaries, has more than a fifty percent (50%) equity interest at the time. Article I of the Loan Agreement is hereby amended by adding the following definitions thereto: "Borrowing Base Securities" means Eligible Marketable Securities of Borrower that are added to the Borrowing Base Properties pursuant to Section 2.14. "Certificate of Liquidity" shall have the meaning set forth in Section 5.28. "Collateral Letter(s) of Credit" means any irrevocable, standby letter of credit naming Bank as the beneficiary with a termination date not sooner than thirty (30) days after the Maturity Date or the Second Term Loan Maturity Date, whichever is later, issued by another bank on terms and conditions satisfactory to Bank, in its sole discretion, which may be drawn upon by the Bank's draft accompanied by a certificate that an Event Default has occurred and is continuing. "Eligible Marketable Securities" means the unrestricted shares of stock in R&B Falcon Corporation, and any other unrestricted shares of stock that are approved by the Bank in its sole discretion. "Fifth Amendment" means the Fifth Amendment to this Agreement executed by Borrower and Bank effective on March 22, 1999. "Guarantor" means, individually and collectively, Paul B. Loyd, Jr., Steven A. Webster, and Douglas A.P. Hamilton. "Guaranty" means the limited guaranty of Borrower's Obligations to Bank with respect to the Second Term Loan, in form and substance satisfactory to Bank, duly executed by each Guarantor. "Liquid Assets" shall have the meaning ascribed to that term in the Guaranty. 2 3 "Pledge of Brokerage Account" means a pledge agreement in form and substance satisfactory to Bank pursuant to which Borrower or any Guarantor, as Debtor, pledges to Bank, as Secured Party, a brokerage account of Borrower or such Guarantor, in which are deposited Cash, Cash Equivalent, or Eligible Marketable Securities owned by such party. "Second Term Loan" means that certain $9,000,000.00 term loan made or to be made by Bank to Borrower pursuant to Section 2.22 hereof. "Second Term Loan Maturity Date" means the earlier of: (1) the date of closing of the issuance of additional equity of Borrower if the proceeds of such issuance is sufficient to repay the Second Term Loan; (2) the date of closing of the issuance of convertible subordinated debt of Borrower if the proceeds of such issuance is sufficient to repay the Second Term Loan; (3) the date of repayment of the Revolving Loan; and (4) January 1, 2001. "Second Term Note" means the promissory note in the original face amount of $9,000,000.00 dated of even date herewith, made by Borrower payable to the order of Bank, in substantially the form attached to the Fifth Amendment as Exhibit "B," together with all deferrals, renewals, extensions, amendments, modifications or rearrangements thereof, which promissory note shall evidence the advances to Borrower by Bank pursuant to Section 2.22 hereof. "Stock Pledge Agreement" means a pledge agreement in form and substance satisfactory to Bank pursuant to which Borrower or any Guarantor, as Debtor, pledges to Bank, as Secured Party, Eligible Marketable Securities owned by such party. Article II of the Loan Agreement is hereby amended by revising the following sections as follows: Section 2.09, Mandatory Prepayment of the Notes, is hereby amended by replacing the number "thirty (30)" in the third line thereof with the number "fifteen (15)" and by replacing the text: "Cash and/or Cash Equivalent of Borrower" in the eighth and ninth lines thereof with the text: "Cash, Cash Equivalent and/or Eligible Marketable Securities of Borrower or any Guarantor". Section 2.10, Borrowing Base Determination, is hereby amended by re-lettering paragraph "c. Equity Cushion" and paragraph "d. Unscheduled Borrowing Base Redetermination" as paragraphs "d" and "e", respectively, and by inserting the following paragraph "c": c. Borrowing Base Securities. At each time that the Bank redetermines the Borrowing Base attributable to the Borrowing Base Oil and Gas Properties, as set forth in Section 2.10(a), it shall also include in the Borrowing Base calculation seventy-five percent (75%) of the market value of the Borrowing Base Securities that are either in the Bank's possession and are subject to one or more of the applicable Security Agreements, or are in a brokerage account that has been pledged to Bank on terms and conditions satisfactory to Bank, in its sole discretion, with the market value thereof to be determined based on the announced value at which such securities were trading as of the close of trading on the last 3 4 trading day of the month preceding the month in which the Bank notifies Borrower of the redetermination of the Borrowing Base. Section 2.10, Borrowing Base Determination, is hereby further amended with respect to paragraph "e", formerly paragraph "d", by inserting the following text in the fourth line between the words "time" and "which": and Bank intends to monitor the Borrowing Base value of the Borrowing Base Securities on a weekly basis and redetermine the Borrowing Base whenever Bank deems it prudent based on changes in the weekly value of the Borrowing Base Securities, Section 2.11, Assignment of Production, is hereby amended by replacing the section references "3.17 and/or 3.19" in the third line from the end thereof with the section references "3.14 and/or 3.16". Section 2.14 Addition of Borrowing Base Properties is hereby amended by replacing that section in its entirety with the following: 2.14 Addition of Borrowing Base Properties. Borrower may, from time to time upon thirty (30) days prior written notice to Bank, propose to add Oil and Gas Properties, Cash, Cash Equivalent, and/or Eligible Marketable Securities of Borrower or any Guarantor to the Borrowing Base Properties. Any such proposal to add Oil and Gas Properties of Borrower or any Guarantor to the Borrowing Base Properties shall be accompanied by an engineering report applicable to such Oil and Gas Properties that conforms to the requirements of Section 2.10, evidence sufficient to establish that Borrower and/or such Guarantor, as applicable, has Marketable Title to such Oil and Gas Properties, and such other data as Bank may reasonably request. Any such proposal to add Eligible Marketable Securities of Borrower or any Guarantor to the Borrowing Base properties shall be accompanied by evidence sufficient to establish that Borrower or such Guarantor has Marketable Title to such Eligible Marketable Securities, and such other data as Bank may reasonably request. Any such additions shall become effective at such time as: (a) Bank has made its determination in the ordinary course of business of the amount by which the Borrowing Base would be increased as the result of such addition and (b) the conditions set forth in Article III hereof, to the extent they are applicable to such additional Borrowing Base Properties of Borrower or any Guarantor, have been satisfied. 4 5 Article II of the Loan Agreement is hereby amended by replacing the following sections in their entirety as follows: 2.22 Second Term Loan. Based on the terms and conditions and relying on the representations and warranties contained in this Agreement, (i) Bank has heretofore advanced $7,000,000.00 of the Second Term Loan to Borrower, and (ii) subject to the terms and conditions and relying on the representations and warranties contained in this Agreement, Bank agrees to advance $2,000,000.00 of the Second Term Loan at the closing of the Fifth Amendment. 2.23 Second Term Note. The obligation of Borrower to repay the Second Term Loan shall be evidenced by the Second Term Note. 2.24 Repayment of Second Term Loan. Interest on the Second Term Note, calculated as aforesaid in Section 2.04, shall be repaid by Borrower in monthly installments on the first day of each month following the advance from Bank to Borrower pursuant to Section 2.22, through and including the Term Loan Maturity Date. For the period beginning on the date of the Fifth Amendment until December 1, 2000, principal payments on the Second Term Loan evidenced by this Note shall not be due, unless preceded by the Second Term Loan Maturity Date, when the entire unpaid balance of this Note, inclusive of principal and interest, shall be paid in full. Except as provided for in the preceding sentence, the principal payments under the Second Term Loan evidenced by the Second Term Note will be repaid in twelve (12) equal consecutive monthly installments in the amount of $750,000.00 each, beginning on January 1, 2000, and continuing on the first day of each calendar month thereafter until the Second Term Loan Maturity Date, when the entire unpaid balance of the Second Term Note, inclusive of principal and interest, shall be paid in full. 2.25 Voluntary Prepayment of the Second Term Note. Borrower shall have the right and option to prepay, at any time without penalty, the entire balance outstanding on the Second Term Note, together with all accrued, unpaid interest. Article III of the Loan Agreement is hereby amended by replacing the following sections in their entirety as follows: 3.14 Security Instruments. As security for the payment of the Notes and the performance of the Obligations of Borrower under this Agreement, Bank shall have received the Security Instruments, duly executed by Borrower with respect to Borrowing Base properties owned by Borrower and duly executed by the applicable Guarantor with respect to Borrowing Base Properties owned by such Guarantor. 3.16 Documents Required for Subsequent Disbursements. As of the time of funding any additional advances to Borrower that are made in conjunction with the addition to the Borrowing Base Properties of Oil and Gas Properties, Cash, Cash Equivalent, and/or Eligible Marketable Securities owned by Borrower or any Guarantor, Borrower shall have duly delivered or caused to be delivered to Bank: (i) the Security Instruments that are 5 6 necessary or appropriate, in the opinion of Bank, relating to such additional Borrowing Base Properties, (ii) Transfer Order Letters applicable to the production of oil and gas from any additional Oil and Gas Properties added to the Borrowing Base Properties, and (iii) possession of any such additional Borrowing Base Cash and Borrowing Base Securities. Article III of the Loan Agreement is hereby amended by adding the following Section 3.19. 3.19 Conditions Precedent in Connection with the Fifth Amendment. The obligation of Bank to make the $2,000,000.00 disbursement pursuant to the Second Term Loan referred to in Section 2.22 of this Agreement is subject to satisfaction of the following conditions precedent: (a) Receipt of Second Term Note, Fifth Amendment and Certificate of Compliance. Bank shall have received the Second Term Note, multiple counterparts of the Fifth Amendment, as requested by Bank, and the Certificate of Compliance duly executed by an authorized officer for Borrower. (b) Receipt of Collateral Documents. As security for the payment of the Notes and the performance of the obligations of Borrower under this Agreement, Bank shall have received: (i) a duly executed Guaranty from each Paul B. Loyd, Jr., Steven A. Webster, and Douglas A.P. Hamilton, as Guarantors, of Borrower's Obligations to Bank with respect to the Second Term Loan, in form and substance satisfactory to Bank; (ii) a duly executed Stock Pledge Agreement from Steven A. Webster covering 143,800 shares of stock of R&B Falcon Corporation owned by Steven A. Webster, along with a duly executed corresponding stock power; (iii) a duly executed Pledge of Brokerage Account from Paul B. Loyd, Jr. covering Compass Brokerage, Inc. Account No. 5AC-036699; and (iv) satisfactory evidence that Douglas A.P. Hamilton has obtained the issuance of a Collateral Letter of Credit in the amount of $670,000.00. (c) Receipt of Certified Copy of Corporate Proceedings and Certificate of Incumbency. Bank shall have received from Borrower copies of the resolutions of its board of directors authorizing the transactions set forth in the Fifth Amendment and the execution of the Fifth Amendment and the Second Term Note, such copy or copies to be certified by the secretary or an assistant secretary as being true and correct and in full force and effect as of the date of such certificate. In addition, Bank shall have received from Borrower a certificate of incumbency signed by the secretary or an assistant secretary setting forth (a) the names of the officers executing the Fifth Amendment and the Second Term Note, (b) the office(s) to which such Persons have been elected and in which they presently serve and (c) an original specimen signature of each such person. 6 7 (d) Accuracy of Representations and Warranties and No Event of Default. The representations and warranties contained in Article IV of the Loan Agreement shall be true and correct in all material respects on the date of the making of such Second Term Loan with the same effect as though such representations and warranties had been made on such date; and no Event of Default shall have occurred and be continuing or will have occurred at the completion of the making of such Loan. (e) Legal Matters Satisfactory to Special Counsel to Bank. All legal matters incident to the consummation of the transactions contemplated by the Fifth Amendment shall be satisfactory to the firm of Porter & Hedges, L.L.P., special counsel for Bank. (f) No Material Adverse Change. No material adverse change shall have occurred since the date of this Agreement in the condition, financial or otherwise, of Borrower. (g) Facility Fee. Bank shall have received the Facility Fee in the amount of $40,000.00 prior to or at closing of the Fifth Amendment. Article IV of the Loan Agreement is hereby amended as follows: References to Borrower's Representations and Warranties under Sections 4.03, 4.05, 4.12, 4.14, 4.15, 4.16, 4.18, and 4.20 shall also apply with equal force and effect to each Guarantor under those sections. Section 4.11 Scope and Accuracy of Financial Statements of the Loan Agreement is hereby amended by replacing the text of that section as follows: 4.11 Scope and Accuracy of Financial Statements. All Financial Statements submitted and to be submitted to Bank hereunder, including, without limitation, the Financial Statements of Borrower and Guarantor, are and will be complete and correct in all material respects; with respect to Borrower, are and will be prepared in accordance with GAAP and practices consistently applied; with respect to Guarantor, are and will be prepared on a cash accounting basis and tax accounting practices consistently applied; and do and will fairly reflect the financial condition and the results of the operations of Borrower and Guarantor in all material respects as of the dates and for the period stated therein (subject only to normal year-end audit adjustments with respect to such unaudited interim statements of Borrower); and no material adverse change has since occurred in the condition, financial or otherwise, of Borrower or Guarantor, or their respective Subsidiaries (taken as a whole). Article V of the Loan Agreement is hereby amended as follows: References to Borrower's Affirmative Covenants under Sections 5.08 and 5.16 shall also apply with equal force and effect to each Guarantor under those sections. Article V of the Loan Agreement is hereby amended by adding the following new sections: 7 8 5.26 Annual Unaudited Financial Statements of Guarantor. Deliver or cause to be delivered to Bank, on or before the ninetieth (90th) day after the close of each calendar year, unaudited personal Financial Statements of Guarantor as at the end of such year, which Financial Statements shall include cash flow and contingent liability information, and shall be certified by the Guarantor as being true and correct. 5.27 Guarantor's Tax Returns. Deliver or cause to be delivered to Bank, on or before the forty-fifth (45th) day after each Guarantor's annual personal tax return for the preceding tax year is filed with the Internal Revenue Service, copies of the first two pages of such annual personal tax return of such Guarantor for the such tax year, certified by such Guarantor as being true and correct. 5.28 Liquidity of Certain Guarantors. Borrower shall cause each of the Guarantors to deliver to Bank a Certificate of Liquidity pursuant to and in the form attached to the Guaranty, certifying the value of such Guarantor's Liquid Assets. Article VI of the Loan Agreement is hereby amended as follows: Section 6.06, Sales of Assets, of the Loan Agreement is hereby amended by replacing the text of that section as follows: 6.06 Sales of Assets. Sell, lease, assign, transfer or otherwise dispose of, in one or any series of related transactions, all or any part of its assets, if such transfer is material to Borrower's operations, nor enter into any arrangement, directly or indirectly, with any Person to sell and rent or lease back such assets or any part thereof which are intended to be used for substantially the same purpose or purposes as the assets sold or transferred; provided, however, that Bank will consent to sales, leases, assignments, transfers or other dispositions of assets representing not more than ten percent (10%), in the aggregate, of the net present value, as calculated by Bank in its sole discretion, of the Oil and Gas Properties that are included in the Borrowing Base Properties at any time, subject to a contemporaneous reduction in the Borrowing Base, in an amount determined by Bank in its sole discretion, as the result of the removal of such Oil and Gas Properties from the Borrowing Base Properties, and if a Loan Excess would result from such reduction in the Borrowing Base, such Loan Excess shall be repaid contemporaneously with the consummation of such sale. Article VII of the Loan Agreement is hereby amended as follows: Section 7.01 is hereby amended by adding thereto the following new clause (j): (j) Borrower shall fail to cause each of the Guarantors to deliver a Certificate of Liquidity of such Guarantor by the date specified in the Guaranty, or any such Certificate of Liquidity shall be false or misleading in any material respect or shall disclose that such Guarantor owns Liquid Assets valued at less than $5,000,000.00. Section 8.03 is hereby amended by adding thereto the following at the end of clause (b): 8 9 with copies to: Steven A. Webster Paul B. Loyd, Jr. Douglas A. P. Hamilton 901 Threadneedle, 901 Threadneedle c/o Anatar Investments, Inc. Suite 200 Suite 200 485 Madison Ave. Houston, Texas 77079 Houston, Texas 77079 23rd Floor Fax: (281) 589-4440 Fax: (281) 496-1749 New York, NY 10022 Fax: (212) 584-2195 Exhibit "A" (Form of Note) attached to the Fourth Amendment is hereby replaced with Exhibit "A" attached to this Fifth Amendment. Exhibit "C" (Security Instruments) attached to the Loan Agreement is hereby amended by replacing paragraph 4 therein with the following paragraph 4: 4. SECURITY AGREEMENT (PLEDGE) granting Bank a first priority security interest in all of Borrower's or any Guarantor's Borrowing Base Cash and Borrowing Base Securities that are held in Borrower's or such Guarantor's name, and all products and proceeds thereof, if, as and when Borrowing Base Cash and/or Borrowing Base Securities are added to the Borrowing Base Properties. Exhibit "C" (Security Instruments) attached to the Loan Agreement is hereby further amended by renumbering paragraphs 5 through 7 thereof as paragraphs 7 through 9, and by adding the following new paragraphs 5 and 6: 5. PLEDGE OF DEPOSIT ACCOUNT granting Bank a first priority security interest in all of Borrower's or any Guarantor's Borrowing Base Securities that are held in a brokerage account, and all products and proceeds thereof, if, as and when Borrowing Base Securities held in a brokerage account are added to the Borrowing Base Properties. 6. COLLATERAL LETTERS OF CREDIT naming Bank as beneficiary, if, as and when Collateral Letters of Credit are added to the Borrowing Base Properties. Exhibit "E" (Form of Monthly Borrowing Base Certificate) attached to the Loan Agreement is hereby replaced with Exhibit "B" attached to this Fifth Amendment. II Reaffirmation of Representations and Warranties. To induce Bank to enter into this Fifth Amendment, Borrower hereby reaffirms, as of the date hereof, its representations and warranties contained in Article IV of the Loan Agreement and in all other documents executed pursuant thereto, and additionally represents and warrants as follows: A. The execution and delivery of this Fifth Amendment and the performance by Borrower of its obligations under this Fifth Amendment are within Borrower's power, have been duly authorized by all necessary corporate action, have received all necessary governmental approval (if any shall be required), and do not and will not contravene or 9 10 conflict with any provision of law or of the charter or by-laws of Borrower or of any agreement binding upon Borrower. B. The Loan Agreement as amended by this Fifth Amendment, represents the legal, valid and binding obligations of Borrower, enforceable against Borrower in accordance with its terms, subject as to enforcement only to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally. C. No Event of Default or Unmatured Event of Default has occurred and is continuing as of the date hereof. III Defined Terms. Except as amended hereby, terms used herein that are defined in the Loan Agreement shall have the same meanings in this Fifth Amendment. IV Reaffirmation of Loan Agreement. This Fifth Amendment shall be deemed to be an amendment to the Loan Agreement, and the Loan Agreement, as further amended hereby, is hereby ratified, approved and confirmed in each and every respect. All references to the Loan Agreement herein and in any other document, instrument, agreement or writing shall hereafter be deemed to refer to the Loan Agreement as amended hereby. V Entire Agreement. The Loan Agreement, as hereby further amended, embodies the entire agreement between Borrower and Bank and supersedes all prior proposals, agreements and understandings relating to the subject matter hereof. Borrower certifies that it is relying on no representation, warranty, covenant or agreement except for those set forth in the Loan Agreement as hereby further amended and the other documents previously executed or executed of even date herewith. VI Governing Law. THIS FIFTH AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. This Fifth Amendment has been entered into in Harris County, Texas, and it shall be performable for all purposes in Harris County, Texas. Courts within the State of Texas shall have jurisdiction over any and all disputes between Borrower and Bank, whether in law or equity, including, but not limited to, any and all disputes arising out of or relating to this Fifth Amendment or any other Loan Document; and venue in any such dispute whether in federal or state court shall be laid in Harris County, Texas. VII Severability. Whenever possible each provision of this Fifth Amendment shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Fifth Amendment shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Fifth Amendment. VIII Execution in Counterparts. Each party hereto acknowledges that this Agreement may be executed in several counterparts by each party at different times and in different locations; that each separate counterpart bearing the signature of any party may be effectively delivered to the other parties by the delivery of an electronic facsimile sent via telecopier; that each party so delivering any such counterpart shall be bound by its facsimile signature thereon; and that the signature pages from 10 11 counterparts signed by each party may be collated into one or more copies of this agreement, which shall constitute one and the same agreement among all parties hereto. IX Section Captions. Section captions used in this Fifth Amendment are for convenience of reference only, and shall not affect the construction of this Fifth Amendment. X Successors and Assigns. This Fifth Amendment shall be binding upon Borrower and Bank and their respective successors and assigns, and shall inure to the benefit of Borrower and Bank, and the respective successors and assigns of Bank. XI Non-Application of Chapter 346 of Texas Finance Codes. In no event shall Chapter 346 of the Texas Finance Code (which regulates certain revolving loan accounts and revolving tri-party accounts) apply to this Loan Agreement as hereby further amended or any other Loan Documents or the transactions contemplated hereby. XII Notice. THIS FIFTH AMENDMENT TOGETHER WITH THE LOAN AGREEMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. IN WITNESS WHEREOF, the parties hereto have caused this Fifth Amendment to be duly executed as of the day and year first above written. BANK BORROWER COMPASS BANK CARRIZO OIL & GAS, INC. By: By: --------------------------------- -------------------------------- Kathleen J. Bowen Frank A. Wojtek Vice President Vice President 11 12 EXHIBIT "A" AMENDED AND RESTATED TERM NOTE $9,000,000.00 Houston, Texas March 22, 1999 On the dates hereinafter prescribed, for value received, CARRIZO OIL & GAS, INC., a Texas corporation (the "Borrower"), having an address at 14811 St. Mary's Lane, Suite 148, Houston, Texas 77079, promises to pay to the order of COMPASS BANK (herein called "Bank"), at its principal offices at 24 Greenway Plaza, Fourteenth Floor, Houston, Harris County, Texas 77046, (i) the principal amount of NINE MILLION AND NO/100 DOLLARS ($9,000,000.00), and (ii) interest on the principal balance remaining unpaid from the date of the advance until maturity at a rate of interest equal to lesser of (a) the "Floating Rate" (as hereinafter defined), calculated on the basis of a year of 365 or 366 days, as the case may be, and for the actual number of days elapsed (including the first day but excluding the last day), or (b) the "Maximum Rate" (as hereinafter defined). Any increase or decrease in interest rate resulting from a change in the Maximum Rate shall be effective immediately when such change becomes effective, without notice to Borrower, unless Applicable Law (as defined below) requires that such increase or decrease not be effective until a later time, in which event such increase or decrease shall be effective at the earliest time permitted under the provisions of such law. Notwithstanding the foregoing, if during any period the Floating Rate exceeds the Maximum Rate, the rate of interest in effect on this Note shall be limited to the Maximum Rate during each such period, but at all times thereafter the rate of interest in effect on this Note shall be the Maximum Rate until the total amount of interest accrued on this Note equals the total amount of interest which would have accrued hereon if the Floating Rate had at all times been in effect. All payments on this Note shall be applied first to accrued interest and the balance, if any, to principal. "Floating Rate" means a per annum interest rate equal to the Index Rate (as defined below) in effect from time to time plus two percent (2.0%), provided that at such time no Event of Default or Unmatured Event of Default (as defined in the First Amended, Restated, and Combined Loan Agreement dated August 28, 1997, as amended by the First Amendment thereto dated December 23, 1997, the Second Amendment thereto dated December 30, 1997, the Third Amendment dated July 30, 1998, the Fourth Amendment dated September 24, 1998 and the Fifth Amendment thereto of even date herewith, between Borrower and Bank (the "Loan Agreement")) has occurred and is continuing; then thereafter, "Floating Rate" shall mean a per annum interest rate equal to the Index Rate in effect from time to time plus five percent (5%). "Index Rate" means at any time, the prime rate established in The Wall Street Journal's "Money Rates" or similar table. If multiple prime rates are quoted in the table, then the highest prime rate will be the Index Rate. In the event that the prime rate is no longer published by The Wall Street Journal in the "Money Rates" or similar table, then Bank may select an alternative published -------------- Initialed for Identification 1 13 index based upon comparable information as a substitute Index Rate. Upon the selection of a substitute Index Rate, the applicable interest rate shall thereafter vary in relation to the substitute index. Such substitute index shall be the same index that is generally used as a substitute by Bank on all Index Rate loans. The Index Rate is seven and three-fourths percent (7.75%) as of the date of this Agreement. "Maximum Rate" means the Maximum Rate of non-usurious interest permitted from day to day by Applicable Law. "Applicable Law" means that law in effect from time to time and applicable to this Note which lawfully permits the charging and collection of the highest permissible lawful, non-usurious rate of interest on this Note. To the extent federal law permits Lender to contract for, charge or receive a greater amount of interest, Lender will rely on federal law instead of the Texas Finance Code for the purpose of determining the Maximum Rate. Additionally, to the maximum extent permitted by applicable law now or hereafter in effect, Lender may, at its option and from time to time, implement any other method of computing the Maximum Rate under the Texas Finance Code or under other applicable law, by giving notice, if required, to Borrower as provided by applicable law now or hereafter in effect. Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents, it is not the intention of Lender to accelerate the maturity of any interest that has not accrued at the time of such acceleration or to collect unearned interest at the time of such acceleration. "Business Day" shall mean any day on which banks are open for general banking business in the State of Texas, other than a Saturday, a Sunday, a legal holiday or any other day on which banks in the State of Texas are required or authorized by law or executive order to close. Interest on this Note, calculated pursuant to Section 2.04 of the Loan Agreement, shall be repaid by Borrower in monthly installments on the first day of each month following the advance from Bank to Borrower pursuant to Section 2.22 of the Loan Agreement, through and including the Term Loan Maturity Date. For the period beginning on the date hereof until December 1, 2000, principal payments on the Second Term Loan evidenced by this Note shall not be due, unless preceded by the Second Term Loan Maturity Date (as defined in the Loan Agreement), when the entire unpaid balance of this Note, inclusive of principal and interest, shall be paid in full. Except as provided for in the preceding sentence, the principal payments under the Second Term Loan shall be repaid in twelve (12) equal consecutive monthly installments in the amount of $750,000.00 each, beginning on January 1, 2000, and continuing on the first day of each calendar month thereafter until the Second Term Loan Maturity Date, when the entire unpaid balance of this Note, inclusive of principal and interest, shall be paid in full. When the first (1st) day of a calendar month falls upon a Saturday, Sunday or legal holiday, the payment of interest and principal, if any, due upon such date shall be due and payable upon the next succeeding Business Day. -------------- Initialed for Identification 2 14 In no event shall the aggregate of the interest on this Note, plus any other amounts paid in connection with the loan evidenced by this Note which would under Applicable Law be deemed "interest," ever exceed the maximum amount of interest which, under Applicable Law, could be lawfully charged on this Note. Bank and Borrower specifically intend and agree to limit contractually the interest payable on this Note to not more than an amount determined at the Maximum Rate. Therefore, none of the terms of this Note or any other instruments pertaining to or securing this Note shall ever be construed to create a contract to pay interest at a rate in excess of the Maximum Rate, and neither Borrower nor any other party liable herefor shall ever be liable for interest in excess of that determined at the Maximum Rate, and the provisions of this paragraph shall control over all provisions of this Note or of any other instruments pertaining to or securing this Note. If any amount of interest taken or received by Bank shall be in excess of the maximum amount of interest which, under Applicable Law, could lawfully have been collected on this Note, then the excess shall be deemed to have been the result of a mathematical error by the parties hereto and shall be refunded promptly to Borrower. All amounts paid or agreed to be paid in connection with the indebtedness evidenced by this Note which would under Applicable Law be deemed "Interest" shall, to the extent permitted by Applicable Law, be amortized, prorated, allocated and spread throughout the full term of this Note. This Note is secured by all security agreements, collateral assignments, mortgages and lien instruments executed by Borrower (or by any other party) in favor of Bank, including those executed simultaneously herewith, those executed heretofore and those hereafter executed, and including specifically and without limitation the "Security Instruments" described and defined in the Loan Agreement. This Note is the Amended and Restated Second Term Note issued pursuant to the Fifth Amendment to the Loan Agreement and it amends and restates, but does not extinguish, the Term Note dated September 24, 1998 in the face amount of $7,000,000.00, executed by Borrower and made payable to Bank. Reference is hereby made to the Loan Agreement for a statement of the rights and obligations of the holder of this Note and the duties and obligations of Borrower in relation thereto; but neither this reference to the Loan Agreement nor any provisions thereof shall affect or impair the absolute and unconditional obligation of Borrower to pay any outstanding and unpaid principal of and interest on this Note when due, in accordance with the terms of the Loan Agreement. In the event of default in the payment when due of any of the principal of or any interest on this Note, or in the event of default under the terms of the Loan Agreement or any of the Security Instruments, or if any event occurs or condition exists which authorizes the acceleration of the maturity of this Note under any agreement made by Borrower, Bank (or other holder of this Note) may, at its option, without presentment or demand or any notice to Borrower or any other person liable herefor, declare the unpaid principal balance of and accrued interest on this Note to be immediately due and payable. If this Note is collected by suit or through the Probate or Bankruptcy Court, or any judicial proceeding, or if this Note is not paid at maturity, however such maturity may be brought about, and -------------- Initialed for Identification 3 15 is placed in the hands of an attorney for collection, then Borrower agrees to pay reasonable attorneys' fees, not to exceed 10% of the full amount of principal and interest owing hereon at the time this Note is placed in the hands of an attorney. Borrower and all sureties, endorsers and guarantors of this Note waive demand, presentment for payment, notice of nonpayment, protest, notice of protest, notice of intent to accelerate maturity, notice of acceleration of maturity, and all other notices, filing of suit and diligence in collecting this Note or enforcing any of the security herefor, and agree to any substitution, exchange or release of any such security or the release of any party primarily or secondarily liable hereon and further agrees that it will not be necessary for Bank, in order to enforce payment of this Note by them, to first institute suit or exhaust its remedies against any Borrower or others liable herefor, or to enforce its rights against any security herefor, and consent to any one or more extensions or postponements of time of payment of this Note on any terms or any other indulgences with respect hereto, without notice thereof to any of them. Bank may transfer this Note, and the rights and privileges of Bank under this Note shall inure to the benefit of Bank's representatives, successors or assigns. Executed effective the 22nd day of March 1999. CARRIZO OIL & GAS, INC. By: --------------------------------- Frank A. Wojtek Vice President 4 16 EXHIBIT "B" FORM OF MONTHLY BORROWING BASE CERTIFICATE I, the undersigned officer of CARRIZO OIL & GAS, INC. (the "Company"), pursuant to Section 5.06 of the First Amended, Restated, and Combined Loan Agreement dated as of August 28, 1997, as amended from time to time, by and between COMPASS BANK (the "Bank") and the Company (the "Agreement"), do hereby certify that: The Borrowing Base, calculated in accordance with the Agreement as of the last day of the month preceding the month in which this certificate is executed and delivered to the Bank (the "Effective Date"), is $_________________. Such Borrowing Base is the sum of the following Borrowing Base components calculated as of the Effective Date: a. Borrowing Base Cash (including Collateral Letters of Credit) in the amount of $___________; plus b. Borrowing Base Securities valued, for Borrowing Base purposes(1), at $___________; plus c. Borrowing Base Oil and Gas Properties valued, pursuant to Section 2.10 of the Agreement, at $_________________, inclusive of the Monthly Borrowing Base Reduction most recently established by the Bank pursuant to Section 2.10. This certificate is executed this ____ day of ___________, 199____. CARRIZO OIL & GAS, INC. By: -------------------------------- Frank A. Wojtek Vice President - -------- (1) The Borrowing Base value of Borrowing Base Securities equals 75% of the announced value of such securities as of the close of trading on the last trading day of the month in which the Effective Date occurs. 17 EXHIBIT "C" COMPLIANCE CERTIFICATE I, Frank A. Wojtek, Vice President of CARRIZO OIL & GAS, INC. (the "Company"), pursuant to Section 3.19 of the First Amended, Restated, and Combined Loan Agreement dated as of August 28, 1997, as amended, by and among COMPASS BANK ("Bank") and the Company (the "Agreement") do hereby certify, as of the date hereof, that to my knowledge: 1. No Event of Default (as defined in the Agreement) has occurred and is continuing, and no Unmatured Event of Default (as defined in the Agreement) has occurred and is continuing; 2. No material adverse change has occurred in the business prospects, financial condition, or the results of operations of the Company since the date of the previous Financial Statements (as defined in the Agreement) provided to Bank; 3. Each of the representations and warranties of the Company contained in Article IV of the Agreement is true and correct in all respects. This certificate is executed this 22nd day of March 1999. ---------------------------------- Frank A. Wojtek EX-4.2 3 AMENDED LIMITED GUARANTY, DOUGLAS A. P. HAMILTON 1 EXHIBIT 4.2 AMENDED AND RESTATED LIMITED GUARANTY THIS AMENDED AND RESTATED LIMITED GUARANTY ("Guaranty"), is made and entered into effective as of March 22, 1999 by DOUGLAS A. P. HAMILTON ("Guarantor"), for the benefit of COMPASS BANK, a Texas state chartered banking institution ("Bank"). W I T N E S S E T H: WHEREAS, on the date hereof, Bank has advanced or will advance certain funds to CARRIZO OIL & GAS, INC., a Texas corporation ("Borrower") pursuant to that certain Fifth Amendment dated effective March 22, 1999 (the "Fifth Amendment") to the First Amended, Restated, and Combined Loan Agreement dated August 28, 1997, as amended by the First Amendment thereto dated December 23, 1997, the Second Amendment thereto dated December 30, 1997, the Third Amendment thereto dated July 30, 1998, the Fourth Amendment thereto dated September 24, 1998 and said Fifth Amendment (collectively, the "Loan Agreement"), specifically including the indebtedness evidenced by that certain term promissory note dated of even date with the Fifth Amendment, executed by Borrower and payable to Bank, in the principal amount of $9,000,000.00 and all other notes given in substitution therefor or in modification, renewal or extension thereof in whole or in part (the "Second Term Note"); WHEREAS, as a condition to Bank's entry into the Fifth Amendment, and its advance of funds to Borrower thereunder, Guarantor has agreed to enter into this Guaranty of certain indebtedness owed or to be owed by Borrower to Bank; WHEREAS, Guarantor is a senior executive and substantial shareholder of Borrower; and WHEREAS, Guarantor will directly and indirectly benefit from the Second Term Loan, as defined in the Loan Agreement, and evidenced by the Second Term Note. NOW, THEREFORE, for and in consideration of the premises and the extension of credit by Bank to Borrower pursuant to the Loan Agreement, and for TEN AND NO/100 DOLLARS ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and to induce Bank to execute the Fifth Amendment, Bank and Guarantor hereby agree as follows: 1. Guarantor unconditionally guarantees the prompt payment to Bank of the following (the "Guaranteed Indebtedness"): (a) Any and all indebtedness, obligations (including reimbursement obligations) and liabilities of Borrower to Bank now existing or hereafter incurred in connection with or incident to the Second Term Loan, under or arising out of or in connection with any documents executed in connection with any indebtedness of Borrower to Bank in connection with the Second Term Loan or any promissory note or notes executed by Borrower at any time in connection with the Second Term Loan, whether for principal, interest, 2 penalty interest, fees, expenses or otherwise, including, without limitation, all sums, principal, accrued interest and other amounts owing with respect to the Second Term Note, together with any and all renewals, extensions and/or rearrangements thereof, whether with or without notice to Guarantor; (b) All interest, charges, expenses, attorneys' or other fees and any other sums payable to or incurred by the Bank in connection with the execution, administration or enforcement of the Bank's rights and remedies under the Second Term Note; and (c) All post-petition interest on the Guaranteed Indebtedness in the event of a bankruptcy or insolvency of the Borrower. Provided, however, that Guarantor's obligation hereunder shall never exceed $4,500,000.00. Guarantor shall at all times maintain at least $5,000,000.00 in Liquid Assets (defined below). To evidence such maintenance of Liquid Assets, Guarantor shall deliver to Bank, on or before the forty-fifth (45th) day after the end of each calendar quarter, a Certificate of Liquidity in the form attached hereto as Exhibit "A", certifying the value of such Guarantor's Liquid Assets effective as of the end of each calendar quarter. "Liquid Assets" shall mean Cash on hand and balances in checking accounts available for immediate withdrawal, the value, from time to time, of short-term, highly liquid investments that are readily convertible to Cash (defined below), such as treasury bills, commercial paper and money market funds, and the value, from time to time, of unrestricted shares of stock that are publicly traded on the New York Stock Exchange, the American Stock Exchange, or NASDAQ, and otherwise acceptable to the Bank, but only to the extent the foregoing are free from all liens, claims and encumbrances, including liens or security interests in favor of the Bank. "Cash" shall mean legal tender of the United States of America. 2. If the Guaranteed Indebtedness is not paid by Guarantor when due, as required herein, and this Guaranty is placed in the hands of an attorney for collection, or if this Guaranty is enforced by suit or through the Bankruptcy Court or through any judicial proceedings, Guarantor shall pay to Bank an amount equal to its reasonable attorneys' fees and collection costs incurred by Bank in the collection of the Guaranteed Indebtedness. 3. This is an absolute, complete and continuing Guaranty, and no notice of the Guaranteed Indebtedness or any extension of credit already or hereafter contracted by or extended to Borrower need be given to Guarantor, nor shall anything herein contained be a limitation upon the amount of credit which may be extended to Borrower, the numbers of transactions with Borrower, repayments by Borrower to Bank, or the allocation by Bank of repayment by Borrower, it being the understanding of the Guarantor that Guarantor's liability shall continue hereunder so long as any of the Guaranteed Indebtedness remains unpaid. Borrower and Bank may rearrange, increase, decrease, extend and/or renew the Guaranteed Indebtedness without notice to Guarantor and in such event Guarantor will remain fully bound hereunder on the Guaranteed Indebtedness. The obligations of Guarantor hereunder shall not be released, impaired or diminished by any amendment, modification or alteration of the Loan Agreement or the Second Term Note. Guarantor expressly waives all notices of any kind, presentment for payment, demand for payment, protest, notice of protest, notice of intent to accelerate, notice of acceleration, dishonor, diligence, notice of any amendment of the Loan Agreement, notice of any adverse change in the financial condition of 2 3 Borrower, notice of any adjustment, indulgence, forbearance or compromise that might be granted or given by Bank to Borrower, and also notice of acceptance of this Guaranty, acceptance on the part of Bank being conclusively presumed by its request for this Guaranty and delivery of the same to it. The liability and obligations of Guarantor hereunder shall not be affected or impaired by any action or inaction by Bank in regard to any matter waived or notice of which is waived by Guarantor in this paragraph or in any other paragraph of this Guaranty. 4. Guarantor authorizes Bank, without notice or demand and without affecting Guarantor's liability hereunder, (a) to take and hold security for the payment of this Guaranty and/or the Guaranteed Indebtedness, and to exchange, enforce, waive and/or release any such security; (b) to apply such security and direct the order or manner of sale thereof as Bank in its discretion may determine; (c) to obtain a guaranty of the Guaranteed Indebtedness from any one or more other persons, corporations or entities whomsoever and to enforce, waive, rearrange, modify, limit or release at any time or times such other persons, corporations or entities from their obligations under such guaranties; (d) to waive or delay the exercise of any of its rights or remedies against the Borrower or any other person or entity; (e) to renew, extend, or modify the terms of any of the Guaranteed Indebtedness or any instrument or agreement evidencing the same; and (f) to fully or partially release at any time any Guarantor which executes this Guaranty whether with or without consideration. 5. Guarantor waives any right to require Bank to (a) proceed against, or make any effort at the collection of the Guaranteed Indebtedness from Borrower or any other guarantor or party liable for the Guaranteed Indebtedness; (b) proceed against or exhaust any collateral held by Bank; or (c) pursue any other remedy in Bank's power whatsoever. Guarantor further waives any and all rights and remedies which Guarantor may have or be able to assert by reason of the provisions of Chapter 34 of the Texas Business and Commerce Code. Guarantor waives any defense arising by reason of any disability, lack of corporate authority or power, or other defense of Borrower or any other guarantor of the Guaranteed Indebtedness, and Guarantor shall remain liable under this Guaranty regardless of whether Borrower or any other guarantor be found not liable on the Guaranteed Indebtedness for any reason including, without limitation, insanity, minority, disability, bankruptcy, insolvency, death or corporate dissolution, even though rendering the Guaranteed Indebtedness void or unenforceable or uncollectible as against Borrower or any other guarantor. This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Indebtedness is rescinded or must otherwise be returned by Bank upon the insolvency, bankruptcy or reorganization of Borrower or otherwise, all as though such payment had not been made and will, thereupon, guarantee payment of such amount as to which refund or restitution has been made, together with interest accruing thereon subsequent to the date of refund or restitution at the applicable rate under the Loan Agreement and collection costs and fees (including, without limitation, attorneys' fees) applicable thereto, subject to the limitations set forth in Sections 1 and 10 hereof. 6. The liability and obligations of Guarantor hereunder shall not be affected or impaired by (a) the failure of Bank or any other party to exercise diligence or reasonable care in the preservation, protection or other handling or treatment of all or any part of the collateral securing payment of all or any part of the Guaranteed Indebtedness, (b) the failure of any security interest or lien intended to be granted or created to secure the Guaranteed Indebtedness to be properly perfected 3 4 or created or the unenforceability of any security interest or lien for any other reason, or (c) the subordination of any such security interest or lien to any other security interest or lien. 7. Bank may pursue any remedy without altering the obligations of Guarantor hereunder and without liability to Guarantor, even though Bank's pursuit of such remedy may result in Guarantor's loss of rights of subrogation or to proceed against others for reimbursement or contribution or any other right. In no event shall any payment by Guarantor entitle it, by subrogation or otherwise, to any rights against Borrower or any right to participate in any security now or hereafter held by Bank prior to payment in full of all of the Guaranteed Indebtedness and, in any event, not until 367 days after the making of any payment and/or the granting of any security interest by Borrower or any other guarantor to Bank in connection with the Guaranteed Indebtedness. 8. Should the status of Borrower change in any way, including, without limitation, as a result of any dissolution of Borrower, any sale, lease or transfer of any or all of the assets of Borrower, any changes in the shareholders of Borrower, or any reorganization of Borrower, this Guaranty shall continue, and shall cover the Guaranteed Indebtedness under the new status. 9. The liability of Guarantor for the payment of the Guaranteed Indebtedness shall be primary and not secondary. 10. Guarantor is familiar with and has independently reviewed the books and records regarding the financial condition of Borrower and is familiar with the value of any and all collateral intended to be granted as security for the payment of the Guaranteed Indebtedness; Guarantor is not, however, relying on such financial condition or such collateral as an inducement to enter into this Guaranty. As of the date hereof, and after giving effect to this Guaranty and the contingent obligations evidenced hereby, Guarantor is, and will be, solvent, and has and will have assets and property which, valued fairly, exceed such Guarantor's obligations, debts and liabilities, and has and will have assets and property sufficient to satisfy, repay and discharge the same. Notwithstanding the definition of Guaranteed Indebtedness herein, the liability of Guarantor hereunder is limited to (a) the lowest amount that would render this Guaranty void against creditors or creditors' representatives under any fraudulent conveyance or similar law or under Sections 544 or 548 of the Bankruptcy Code of 1978, as revised, minus (b) $1.00. 11. If Borrower shall at any time or times be or become obligated to Bank for payment of any indebtedness other than the Guaranteed Indebtedness, Bank (without in any way impairing its rights hereunder or diminishing Guarantor's liability) shall be at liberty at any time or times to apply to such other indebtedness any amounts paid to or received by or coming into the hands of Bank from or attributable to Borrower or any other person or party liable for any of such other indebtedness or from or attributable to or representing proceeds of any property or security held by Bank securing payment of such other indebtedness or any credits, deposits or offsets due Borrower or other party liable on any of such other indebtedness (whether or not the Guaranteed Indebtedness or such other indebtedness are then due), it being intended to give Bank the right to apply all payments, credits and offsets and amounts becoming available for application on or credit against the indebtedness of Borrower to Bank (now or hereafter existing) first toward payment and satisfaction of the Borrower's indebtedness not hereby guaranteed, before making application thereof on or against the Guaranteed Indebtedness. 4 5 12. Guarantor represents and warrants that this Guaranty accurately and completely embodies the entire agreement between Guarantor and Bank with respect to the respective rights, obligations and liabilities of Guarantor and Bank hereunder, and supersedes all prior agreements and understandings, if any, relating to the subject matter hereof. Guarantor acknowledges that Guarantor is not relying on any representations (oral or otherwise) of Bank, or any other party, other than as expressly described in this Guaranty. 13. This Guaranty was reviewed by Guarantor, and Guarantor acknowledges and agrees that Guarantor (a) understands fully all of the terms of this Guaranty and the consequences and implications of Guarantor's execution of this Guaranty, and (b) has been afforded an opportunity to have this Guaranty reviewed by, and to discuss the terms, consequences and implications of this Guaranty with an attorney or other such persons as Guarantor may have desired. 14. This Guaranty is and shall be in every particular available to the successors and assigns of Bank and is and shall always be fully binding upon the heirs, executors, administrators, successors and assigns of Guarantor. This Guaranty is intended for and shall inure to the benefit of Bank and each and every other person who shall from time to time be or become the owner or holder of any of the Guaranteed Indebtedness, and each and every reference herein to "Bank" shall also include and refer to each and every successor or assignee of Bank at any time holding or owning any part of or interest in any part of the Guaranteed Indebtedness. This Guaranty shall be transferable and negotiable, with the same force and effect and to the same extent that the Guaranteed Indebtedness is transferable, it being understood and stipulated that upon the assignment or transfer by Bank of any of the Guaranteed Indebtedness the legal or beneficial owner of the Guaranteed Indebtedness (or part thereof or interest therein thus transferred or assigned by Bank) shall also, unless provided otherwise by Bank in its assignment, have and may exercise all of the rights granted to Bank under this Guaranty to the extent of the part of or interest in the Guaranteed Indebtedness thus assigned or transferred to such person or entity. Guarantor expressly waives notice of transfer or assignment of the Guaranteed Indebtedness, or any part thereof, or of the rights of Bank hereunder. 15. All amounts becoming payable by Guarantor to Bank under this Guaranty shall be payable at Bank's offices in the City of Houston, Harris County, Texas. 16. Any notice hereunder to Guarantor shall be in writing, duly stamped and addressed to Guarantor at the address shown below Guarantor's signature hereto, or at such other address as Guarantor may by written notice, received by Bank, have designated as Guarantor's address for such purpose. Any notice provided for herein shall become effective upon the earlier of (a) the first business day of Bank following the deposit in a regularly maintained postal deposit box of the United States Postal Service, or (b) the day of its receipt by Guarantor; but actual notice, however given or received, shall always be effective. The preceding sentence shall not be construed in any way to affect or impair any waiver of notice or demand herein provided or to require giving of notice or demand to or upon Guarantor in any situation or for any reason. 17. It is the intention of the parties hereto to comply strictly with all applicable usury laws; accordingly, it is agreed that notwithstanding any provisions to the contrary in this Guaranty, or in any documents securing payment hereof or otherwise relating hereto, in no event shall this Guaranty or such documents require the payment or permit the collection of an aggregate amount 5 6 of interest in excess of the maximum amount permitted by such laws, including the laws of the State of Texas and the laws of the United States of America. If any such excess of interest is contracted for, charged or received under this Guaranty or under the terms of any documents securing payment hereof or otherwise relating hereto, or if under any circumstances, the amount of interest (including all amounts payable hereunder which are not denominated as interest but which constitute interest under the applicable laws) contracted for, charged or received under this Guaranty shall exceed the maximum amount of interest permitted by the applicable usury laws, then in any such event (a) the provisions of this paragraph shall govern and control, (b) Guarantor shall not be obligated to pay the amount of such interest to the extent that it is in excess of the maximum amount of interest permitted by the applicable usury laws, (c) any such excess interest which may have been collected shall be either applied as a credit against the then unpaid Guaranteed Indebtedness or, if the Guaranteed Indebtedness shall have been paid in full, refunded to Guarantor, and (d) the effective rate of interest shall be automatically reduced to the maximum lawful contract rate allowed under the applicable usury laws as now or hereafter construed by the courts having jurisdiction thereof. It is further agreed that without limitation of the foregoing, all calculations of the rate of interest contracted for, charged or received under this Guaranty or under such other documents which are made for the purpose of determining whether such rate exceeds the maximum lawful contract rate, shall be made, to the extent permitted by applicable usury laws, by amortizing, prorating, allocating and spreading in equal parts during the full period during which this Guaranty is to be in effect, all interest at any time contracted for, charged or received from Guarantor or otherwise by the holder or holders hereof in connection with this Guaranty. 18. In case any of the provisions of this Guaranty shall for any reason be held to be invalid, illegal, or unenforceable, such invalidity, illegality, or unenforceability shall not affect any other provisions hereof, and this Guaranty shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein. 19. In all instances herein, the singular shall be construed to include the plural and the masculine to include the feminine. 20. This Guaranty may be executed in multiple counterparts each of which shall constitute an original, but all of which when taken together shall constitute one and the same Guaranty. 21. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA. All actions or proceedings with respect to the Guaranteed Indebtedness or this Guaranty may be instituted in the Courts of the State of Texas located in Harris County, Texas, or the United States District Court for the Southern District of Texas, and by execution and delivery of this Guaranty, Guarantor irrevocably and unconditionally submits to the jurisdiction (both subject matter and personal) of each such Court, and irrevocably and unconditionally waives (a) any objection Guarantor may now or hereafter have to the laying of venue in any such Courts, (b) any claim that any action or proceeding brought in any of such Courts has been brought in an inconvenient forum, and (c) any right to bring any action or proceeding with respect to the Guaranteed Indebtedness or this Guaranty in any forum other than the courts of the State of Texas located in Harris County, Texas, or the United States District Court for the Southern District of Texas. 6 7 22. GUARANTOR HEREBY RELEASES AND AGREES TO INDEMNIFY AND HOLD BANK AND ITS OFFICERS, EMPLOYEES, DIRECTORS, AGENTS AND ATTORNEYS (COLLECTIVELY THE "BANK PARTIES") HARMLESS, FROM AND AGAINST ALL CLAIMS, DAMAGES, LIABILITIES AND EXPENSES, KNOWN OR UNKNOWN, ACCRUED AND UNACCRUED, INCLUDING ANY OF THE FOREGOING ALLEGED TO HAVE RESULTED FROM NEGLIGENCE OF ANY OF THE BANK PARTIES, UNLESS ATTRIBUTABLE TO BANK PARTIES' OWN GROSS NEGLIGENCE OR WILFUL MISCONDUCT, THAT MAY NOW OR HEREAFTER BE ASSERTED AGAINST ANY OF BANK PARTIES IN CONNECTION WITH OR ARISING OUT OF ANY INVESTIGATION, LITIGATION OR PROCEEDING DIRECTLY OR INDIRECTLY RELATING TO OR ARISING OUT OF ANY OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN AGREEMENT OR THIS GUARANTY. 23. Guarantor represents and warrants to Bank that this Guaranty is a valid, binding and enforceable obligation of Guarantor and does not violate any provisions of any law, rule, regulation, contract or agreement enforceable against Guarantor. 24. Guarantor hereby agrees that a counterpart of this Guaranty bearing the signature of Guarantor may be effectively delivered to the Bank by the delivery of an electronic facsimile sent via telecopier; and that Guarantor shall be bound by his facsimile signature thereon. 25. This Guaranty amends, restates and replaces that certain Limited Guaranty dated September 24, 1998 previously executed and delivered by Guarantor in connection with the Loan Agreement. EXECUTED this day of March, 1999. GUARANTOR: -------------------------------------------- DOUGLAS A. P. HAMILTON Address: c/o Anatar Investments, Inc. 485 Madison Avenue 23rd Floor New York, NY 10022 7 8 STATE OF TEXAS COUNTY OF HARRIS We _________________________, and _______________________, sign our names to this instrument as witnesses to the signature of DOUGLAS A. P. HAMILTON (the "Signor"), and being duly sworn, do hereby declare to the undersigned authority that we are personally acquainted with the Signor, that we know the Signor to be the person that he purports to be through his signature, that he has signed this instrument willingly, and that each of us, in the presence and hearing of the Signor, the undersigned authority, and each other, hereby execute this instrument as witnesses to the Signor's signing, and that to the best of our knowledge, the Signor is twenty-one years of age or older, of sound mind, and under no constraint or undue influence. WITNESSES: -------------------------------------- Printed Name: -------------------------------------- Printed Name: 8 9 STATE OF TEXAS COUNTY OF HARRIS The foregoing instrument was subscribed, sworn to and acknowledged before me by DOUGLAS A. P. HAMILTON this 30th day of March, 1999. -------------------------------------- Notary Public in and for The State of Texas [Notarial Seal or Stamp] 9 EX-4.3 4 STOCK PLEDGE AGREEMENT, STEVEN A. WEBSTER 1 EXHIBIT 4.3 STOCK PLEDGE AGREEMENT This STOCK PLEDGE AGREEMENT (this "Agreement"), dated effective as of March 22, 1999, is entered into between STEVEN A. WEBSTER ("Debtor") and COMPASS BANK, a Texas chartered bank ("Secured Party"), with reference to the following: WHEREAS, Debtor beneficially owns certain shares of common stock, as more fully described on Schedule "A" attached hereto, of the corporation(s) (herein called the "Issuers," whether one or more) identified under the column entitled "Issuer" on Schedule "A"; WHEREAS, Carrizo Oil & Gas, Inc. ("Borrower"), Debtor and Secured Party entered into the Loan Agreement (as hereinafter defined); WHEREAS, Debtor has entered into a guaranty agreement (the "Guaranty Agreement") dated effective March 22, 1999, pursuant to which Debtor has guaranteed certain Obligations (as defined in the Loan Agreement) of Borrower to Secured Party; WHEREAS, to induce Secured Party to grant the extensions of credit and other financial accommodations provided to Borrower pursuant to the Loan Agreement, Debtor agreed to pledge, grant, transfer, and assign to Secured Party a security interest in the Collateral (as hereinafter defined) as security for the Obligations of Borrower under the Loan Agreement and as security for Debtor's obligations under the Guaranty Agreement. NOW, THEREFORE, in consideration of the mutual promises, covenants, representations, and warranties set forth herein and for other good and valuable consideration, the parties hereto agree as follows: 1. Definitions and Construction. (a) Definitions. As used in this Agreement: "Agreement" shall mean this Stock Pledge Agreement. "Bankruptcy Code" shall mean The Bankruptcy Reform Act of 1978 (11 U.S.C. ??101-1330), as amended or supplemented from time to time, and any successor statute, and all of the rules issued or promulgated in connection therewith. "Borrower" shall have the meaning ascribed thereto in the recitations to this Agreement. 2 "Business Day" shall have the meaning ascribed thereto in the Loan Agreement. "Collateral" shall mean the Pledged Shares, the Future Rights, and the Proceeds, collectively. "Debtor" shall have the meaning ascribed thereto in the preamble to this Agreement. "Event of Default" shall have the meaning ascribed thereto in the Loan Agreement. "Future Rights" shall mean: (a) all shares of, all securities convertible or exchangeable into, and all warrants, options or other rights to purchase shares of stock of (i) the Issuers (other than the Pledged Shares), and (ii) any Person which, after the date of this Agreement, becomes a direct Subsidiary of Debtor and is incorporated under the laws of any state of the United States from time to time held or acquired by Debtor in any manner; and (b) the certificates or instruments representing such additional shares, convertible or exchangeable securities, warrants, and other rights and all dividends, cash, options, warrants, rights, instruments, and other property or proceeds from time to time received, receivable, or otherwise distributed in respect of or in exchange for any or all of such shares. "Guaranty Agreement" shall have the meaning ascribed thereto in the recitations to this Agreement. "Holder" and "Holders" shall have the meanings ascribed thereto in Section 3 of this Agreement. "Issuers" shall have the meaning ascribed thereto in the recitals to this Agreement and shall also mean any successors thereto, whether by merger or otherwise. "Lien" shall mean any lien, mortgage, pledge, assignment (including any assignment of rights to receive payments of money), security interest, charge, or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, or any agreement to give any security interest). "Loan Agreement" shall mean that certain First Amended, Restated, and Combined Loan Agreement dated August 28, 1997, as amended by the First Amendment thereto dated December 23, 1997, the Second Amendment thereto dated December 30, 1997, the Third Amendment thereto dated July 30, 1998, the Fourth Amendment dated September 24, 1998, and the Fifth Amendment dated of even date herewith. "Loan Documents" shall have the meaning ascribed thereto in the Loan Agreement. -2- 3 "Obligations" shall have the meaning ascribed thereto in the Loan Agreement. "Person" shall have the meaning ascribed thereto in the Loan Agreement. "Pledged Shares" shall have the meaning ascribed thereto in the recitals to this Agreement. "Proceeds" shall mean all proceeds (including proceeds of proceeds) of the Pledged Shares and Future Rights including all: (a) rights, benefits, distributions, premiums, profits, dividends, interest, cash, instruments, documents of title, accounts, contract rights, inventory, equipment, general intangibles, deposit accounts, chattel paper, and other property from time to time received, receivable, or otherwise distributed in respect of or in exchange for, or as a replacement of or a substitution for, any of the Pledged Shares, Future Rights, or proceeds thereof (including any cash, stock, or other securities or instruments issued after any recapitalization, readjustment, reclassification, merger or consolidation with respect to the Issuers and any claims against financial intermediaries; (b) proceeds of any insurance, indemnity, warranty, or guaranty (including guaranties of delivery) payable from time to time with respect to any of the Pledged Shares, Future Rights, or proceeds thereof; (c) payments (in any form whatsoever) made or due and payable to Debtor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Pledged Shares, Future Rights, or proceeds thereof; and (d) other amounts from time to time paid or payable under or in connection with any of the Pledged Shares, Future Rights, or proceeds thereof. "Secured Party" shall have the meaning ascribed thereto in the preamble to this Agreement. "Securities Act" shall have the meaning ascribed thereto in Section 9(b) of this Agreement. "Subsidiary" shall have the meaning ascribed thereto in the Loan Agreement. All initially capitalized terms used herein and not otherwise defined shall have the meaning ascribed thereto in the Loan Agreement. (b) Construction. (i) Unless the context of this Agreement clearly requires otherwise, references to the plural includes the singular and to the singular includes the plural, the part includes the whole, the term "including" is not limiting, and the term "or" has, except where otherwise indicated, the inclusive meaning represented by the phrase "and/or." The words "hereof," "herein," "hereby," "hereunder," and other similar terms in this Agreement refer to this Agreement as a whole and not exclusively to any particular provision of this Agreement. Article, section, subsection, exhibit, and schedule references are to this Agreement unless otherwise specified. All of the exhibits or schedules attached to this Agreement shall be deemed incorporated herein by reference. Any -3- 4 reference to any of the following documents includes any and all alterations, amendments, extensions, modifications, renewals, or supplements thereto or thereof, as applicable: this Agreement, the Loan Agreement, and any of the other Loan Documents. (ii) Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against Secured Party or Debtor, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by both of the parties and their respective counsel and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of the parties hereto. (iii) In the event of any direct conflict between the express terms and provisions of this Agreement and of the Loan Agreement, the terms and provisions of the Loan Agreement shall control. 2. Pledge. As security for the prompt payment and performance in full of: (a) the Obligations of Borrower to Secured Party with respect to the Second Term Loan only, and (b) the obligations of Debtor to Secured Party in the Guaranty Agreement; when due, whether at stated maturity, by acceleration or otherwise (including amounts that would become due but for the operation of the automatic stay under ?362(a) of the Bankruptcy Code), Debtor hereby pledges, grants, transfers, and assigns to Secured Party a security interest in all of Debtor's right, title, and interest in and to the Collateral. 3. Delivery and Registration of Collateral. (a) All certificates or instruments representing or evidencing the Collateral shall be promptly delivered by Debtor to Secured Party or Secured Party's designee pursuant hereto at a location designated by Secured Party and shall be held by or on behalf of Secured Party pursuant hereto, and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to Secured Party. (b) Secured Party shall have the right, at any time in its discretion and without notice to Debtor, to transfer to or to register on the books of the Issuers (or of any other Person maintaining records with respect to the Collateral) in the name of Secured Party or any of its nominees any or all of the Collateral. In addition, Secured Party shall have the right at any time to exchange certificates or instruments representing or evidencing Collateral for certificates or instruments of smaller or larger denominations. (c) If, at any time and from time to time, any Collateral (including any certificate or instrument representing or evidencing any Collateral) is in the possession of a Person other than Secured Party or Debtor (a "Holder"), then Debtor shall immediately, at Secured Party's option, either cause such Collateral to be delivered into Secured Party's possession, or execute and deliver to such Holder a written notification/ instruction, and take all other steps necessary to perfect the security interest of Secured Party in such Collateral, including obtaining from such Holder a written acknowledgment that such Holder holds such Collateral for Secured Party, all pursuant to the -4- 5 applicable laws governing the perfection of Secured Party's security interest in the Collateral in the possession of such Holder. Each such notification/instruction and acknowledgment shall be in form and substance satisfactory to Secured Party. (d) Any and all Collateral (including dividends, interest, and other cash distributions) at any time received or held by Debtor shall be so received or held in trust for Secured Party, shall be segregated from other funds and property of Debtor and shall be forthwith delivered to Secured Party in the same form as so received or held, with any necessary endorsements. (e) If at any time and from time to time any Collateral consists of an uncertificated security or a security in book entry form, then Debtor shall immediately cause such Collateral to be registered or entered, as the case may be, in the name of Secured Party, or otherwise cause Secured Party's security interest thereon to be perfected in accordance with applicable law. 4. Voting Rights and Dividends. (a) So long as no Event of Default shall have occurred and be continuing, Debtor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Collateral or any part thereof for any purpose not inconsistent with the terms of the Loan Agreement and shall be entitled to receive and retain any cash dividends or distributions paid in respect of the Collateral. (b) Upon the occurrence and during the continuance of an Event of Default, all rights of Debtor to exercise the voting and other consensual rights or receive and retain cash dividends or distributions which it would otherwise be entitled to exercise or receive and retain, as applicable pursuant to Section 4(a) shall cease, and all such rights shall thereupon become vested in Secured Party, who shall thereupon have the sole right to exercise such voting or other consensual rights and to receive and retain such cash dividends and distributions. Debtor shall execute and deliver (or cause to be executed and delivered) to Secured Party all such proxies and other instruments as Secured Party may request for the purpose of enabling Secured Party to exercise the voting and other rights which it is entitled to exercise pursuant to this subsection (b). 5. Representations and Warranties. Debtor represents, warrants, and covenants as follows: (a) Debtor has taken all steps it deems necessary or appropriate to be informed on a continuing basis of changes or potential changes affecting the Collateral (including rights of conversion and exchange, rights to subscribe, payment of dividends, reorganizations or recapitalization, tender offers and voting rights), and Debtor agrees that Secured Party shall have no responsibility or liability for informing Debtor of any such changes or potential changes or for taking any action or omitting to take any action with respect thereto; (b) All information herein or hereafter supplied to Secured Party by or on behalf of Debtor in writing with respect to the Collateral is, or in the case of information hereafter supplied will be, accurate and complete in all material respects; -5- 6 (c) Debtor is and will be the sole legal and beneficial owner of the Collateral (including the Pledged Shares and all other Collateral acquired by Debtor after the date hereof) free and clear of any adverse claim, Lien, or other right, title, or interest of any party; (d) This Agreement, and the delivery to Secured Party of the Pledged Shares representing Collateral (or the delivery to all Holders of the Pledged Shares representing Collateral of the notification/instruction referred to in Section 3 of this Agreement), creates a valid, perfected, and first priority security interest in one hundred percent (100%) of the Pledged Shares in favor of Secured Party securing payment of the Obligations, and all actions necessary to achieve such perfection have been duly taken; (e) Schedule A to this Agreement is true and correct and complete in all material respects; without limiting the generality of the foregoing: (i) all the Pledged Shares are in certificated form, and, except to the extent registered in the name of Secured Party or its nominee pursuant to the provisions of this Agreement, are registered in the name of Debtor; and (ii) the Pledged Shares as to each of the Issuers constitute at least the percentage of all the fully diluted issued and outstanding shares of stock of such Issuer as set forth in Schedule A to this Agreement (if any such percentages are set forth on Schedule A); (f) There are no presently existing Future Rights or Proceeds owned by Debtor; (g) The Pledged Shares have been duly authorized and validly issued and are fully paid and nonassessable; and (h) Neither the pledge of the Collateral pursuant to this Agreement nor the extensions of credit represented by the Obligations violates Regulation G, T, U or X of the Board of Governors of the Federal Reserve System. 6. Further Assurances. (a) Debtor agrees that from time to time, at the expense of Debtor, Debtor will promptly execute and deliver all further instruments and documents, and take all further action that may be necessary or desirable, or that Secured Party may request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable Secured Party to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, Debtor will: (i) at the request of Secured Party, mark conspicuously each of its records pertaining to the Collateral with a legend, in form and substance satisfactory to Secured Party, indicating that such Collateral is subject to the security interest granted hereby; (ii) execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary or desirable, or as Secured Party may request, in order to perfect and preserve the security interests granted or purported to be granted hereby; (iii) as more fully set forth in the Loan Agreement, allow inspection of the Collateral by Secured Party or Persons designated by Secured Party; and (iv) appear in and defend any action or proceeding that may affect Debtor's title to or Secured Party's security interest in the Collateral. -6- 7 (b) Debtor hereby authorizes Secured Party to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of Debtor where permitted by law. A carbon, photographic, or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. (c) Debtor will furnish to Secured Party, upon the request of Secured Party: (1) a certificate executed by Debtor, and dated as of the date of delivery to Secured Party, itemizing in such detail as Secured Party may request, the Collateral which, as of the date of such certificate, has been delivered to Secured Party by Debtor pursuant to the provisions of this Agreement; and (ii) such statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as Secured Party may request. 7. Covenants of Debtor. Debtor shall: (a) Perform each and every covenant in the Loan Agreement and in the Guaranty Agreement applicable to Debtor; (b) At all times keep at least one complete set of its records concerning substantially all of the Collateral at the address set forth below his signature on this Agreement, and not change the location of its office or such records without giving Secured Party at least thirty (30) days prior written notice thereof; and (c) Upon receipt by Debtor of any material notice, report, or other communication from any of the Issuers or any Holder relating to all or any part of the Collateral, deliver such notice, report or other communication to Secured Party as soon as possible, but in no event later than five (5) Business Days following the receipt thereof by Debtor. 8. Secured Party as Debtor's Attorney-in-Fact. (a) Debtor hereby irrevocably appoints Secured Party as Debtor's attorney-in-fact, with full authority in the place and stead of Debtor and in the name of Debtor, Secured Party or otherwise, from time to time at Secured Party's discretion, to take any action and to execute any instrument that Secured Party may deem necessary or advisable to accomplish the purposes of this Agreement, including: (i) after the occurrence and during the continuance of an Event of Default, to receive, endorse, and collect all instruments made payable to Debtor representing any dividend, interest payment or other distribution in respect of the Collateral or any part thereof to the extent permitted hereunder and to give full discharge for the same and to execute and file governmental notifications and reporting forms; (ii) to issue any notifications/instructions Secured Party deems necessary pursuant to Section 3 of this Agreement; or (iii) to arrange for the transfer of the Collateral on the books of the Issuers or any other Person to the name of Secured Party or to the name of Secured Party's nominee. (b) In addition to the designation of Secured Party as Debtor's attorney-in-fact in subsection (a), Debtor hereby irrevocably appoints Secured Party as Debtor's agent and -7- 8 attorney-in-fact to make, execute and deliver any and all documents and writings which may be necessary or appropriate for approval of, or be required by, any regulatory authority located in any city, county or state where Debtor or any of the Issuers engages in business, in order to transfer or to more effectively transfer any of the Pledged Shares or otherwise enforce Secured Party's rights hereunder. 9. Remedies upon Default. Upon the occurrence and during the continuance of an Event of Default: (a) Secured Party may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the Texas Business and Commerce Code (the "Code") (irrespective of whether the Code applies to the affected items of Collateral), and Secured Party may also without notice (except as specified below) sell the Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker's board or at any of Secured Party's offices or elsewhere, for cash, on credit or for future delivery, at such time or times and at such price or prices and upon such other terms as Secured Party may deem commercially reasonable, irrespective of the impact of any such sales on the market price of the Collateral. To the maximum extent permitted by applicable law, Secured Party may be the purchaser of any or all of the Collateral at any such sale and shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply all or any part of the Obligations as a credit on account of the purchase price of any Collateral payable at such sale. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of Debtor, and Debtor hereby waives (to the extent permitted by law) all rights of redemption, stay, or appraisal that it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. Debtor agrees that, to the extent notice of sale shall be required by law, at least ten (10) calendar days notice to Debtor of the time and place of any public sale or the time after which a private sale is to be made shall constitute reasonable notification. Secured Party shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. Secured Party may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. To the maximum extent permitted by law, Debtor hereby waives any claims against Secured Party arising because the price at which any Collateral may have been sold at such a private sale was less than the price that might have been obtained at a public sale, even if Secured Party accepts the first offer received and does not offer such Collateral to more than one offeree. (b) Debtor hereby acknowledges that the sale by Secured Party of any Collateral pursuant to the terms hereof in compliance with the Securities Act of 1933 as now in effect or as hereafter amended, or any similar statute hereafter adopted with similar purpose or effect (the "Securities Act"), as well as applicable "Blue Sky" or other state securities laws may require strict limitations as to the manner in which Secured Party or any subsequent transferee of the Collateral may dispose thereof. Debtor acknowledges and agrees that in order to protect Secured Party's interest it may be necessary to sell the Collateral at a price less than the maximum price attainable if a sale were delayed or were made in another manner, such as a public offering under the Securities -8- 9 Act. Debtor has no objection to sale in such a manner and agrees that Secured Party shall have no obligation to obtain the maximum possible price for the Collateral. Without limiting the generality of the foregoing, Debtor agrees that, upon the occurrence and during the continuation of an Event of Default, Secured Party may, subject to applicable law, from time to time attempt to sell all or any part of the Collateral by a private placement, restricting the bidders and prospective purchasers to those who will represent and agree that they are purchasing for investment only and not for distribution. In so doing, Secured Party may solicit offers to buy the Collateral or any part thereof for cash, from a limited number of investors deemed by Secured Party to be institutional investors or other responsible parties who might be interested in purchasing the Collateral. If Secured Party shall solicit such offers, then the acceptance by Secured Party of one of the offers shall be deemed to be a commercially reasonable method of disposition of the Collateral. (c) If Secured Party shall determine to exercise its right to sell all or any portion of the Collateral pursuant to this Section, Debtor agrees that upon request of Secured Party, Debtor will, at its own expense: (i) execute and deliver, or cause the officers and directors of the Issuers to execute and deliver, to any person, entity or governmental authority as Secured Party may choose, any and all documents and writings which may be necessary or appropriate for approval, or be required by, any regulatory authority located in any city, county, state or country where Debtor or any of the Issuers engage in business, in order to transfer or to more effectively transfer the Pledged Shares or otherwise enforce Secured Party's rights hereunder; (ii) do or cause to be done all such other acts and things as may be necessary to make such sale of the Collateral or any part thereof valid and binding and in compliance with applicable law; and (iii) with respect to any of the Collateral that is not registered under the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto: (a) use its best efforts to execute and deliver, and cause the Borrower and the directors and officers thereof to execute and deliver, all such instruments and documents, and to do or cause to be done all such other acts and things, as may be necessary or, in the opinion of Secured Party, advisable to register such Collateral under the provisions of the Securities Act, and to cause the registration statement relating thereto to become effective and to remain effective for such period as prospectuses are required by law to be furnished, and to make all amendments and supplements thereto and to the related prospectuses which, in the opinion of Secured Party, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto; -9- 10 (b) use its best efforts to qualify the Collateral under the state securities laws or "Blue Sky" laws and to obtain all necessary governmental approvals for the sale of the Collateral, as requested by Secured Party; and (c) cause the Issuers to make available to its or their security holders, as soon as practicable, an earnings statement which will satisfy the provisions of Section II (a) of the Securities Act. Debtor acknowledges that there is no adequate remedy at law for failure by it to comply with the provisions of this Section and that such failure would not be adequately compensable in damages, and therefore agrees that its agreements contained in this Section may be specifically enforced. 10. Secured Party; Duties; Standard of Care. The powers conferred on Secured Party hereunder are solely to protect its interests in the Collateral and shall not impose on it any duty to exercise such powers. 11. CHOICE OF LAW; CONSENT TO JURISDICTION. (a) THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION, INTERPRETATION AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO, SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS. (b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF HARRIS, STATE OF TEXAS OR, AT THE SOLE OPTION OF SECURED PARTY, IN ANY OTHER COURT IN WHICH SECURED PARTY SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF DEBTOR AND SECURED PARTY WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 11. 12. Amendments; etc. No amendment or waiver of any provision of this Agreement nor consent to any departure by Debtor herefrom, shall in any event be effective unless the same shall be in writing and signed by Secured Party, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No failure on the part of Secured Party to exercise, and no delay in exercising any right under this Agreement, the Loan Agreement, or otherwise with respect to any of the Obligations, shall operate as a waiver thereof; nor shall any single or partial exercise of any right under this Agreement, the Loan Agreement, or otherwise with respect to any of the Obligations preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided in this Agreement or otherwise with respect to any of the Obligations are cumulative and not exclusive of any remedies provided by law. -10- 11 13. Notices. Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be given in accordance with the terms of Section 8.03 of the Loan Agreement. Any such notice to Borrower shall also be sent to Debtor as set forth in section 8.03 of the Loan Agreement. 14. Continuing Security Interest. This Agreement shall create a continuing security interest in the Collateral and shall: (i) remain in full force and effect until the indefeasible payment in full of the Obligations, and the full and final termination of any commitment to extend any financial accommodations under the Loan Agreement; (ii) be binding upon Debtor, its successors and assigns; and (iii) inure to the benefit of Secured Party and its successors, transferees, and assigns. Upon the indefeasible payment in full of the Obligations, and the full and final termination of any commitment to extend any financial accommodations under the Loan Agreement, the security interests granted hereby shall automatically terminate and all rights to the Collateral shall revert to Debtor. Upon any such termination, Secured Party will, at Debtor's expense, execute and deliver to Debtor such documents as Debtor shall reasonably request to evidence such termination. Such documents shall be prepared by Debtor and shall be in form and substance satisfactory to Secured Party. 15. Security Interest Absolute. To the maximum extent permitted by law, all rights of Secured Party and security interests hereunder, and all obligations of the Debtor hereunder, shall be absolute and unconditional irrespective of: (a) any lack of validity or enforceability of any of the Obligations or any other agreement or instrument relating thereto, including the Loan Agreement or any of the other Loan Documents; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Loan Agreement or any of the other Loan Documents, or any other agreement or instrument relating thereto; (c) any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to departure from any guaranty for all or any of the Obligations; or (d) any other circumstances that might otherwise constitute a defense available to, or a discharge of, Debtor. To the maximum extent permitted by law, Debtor hereby waives any right to require Secured Party to pursue any other remedy in Secured Party's power whatsoever. 16. Headings. Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement or be given any substantive effect. -11- 12 17. Severability. In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. 18. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same Agreement. 19. Waiver of Marshaling. Each of Debtor and Secured Party acknowledges and agrees that in exercising any rights under or with respect to the Collateral: (i) Secured Party is under no obligation to marshal any collateral pledged to it; (ii) may, in its absolute discretion, realize upon such Collateral in any order and in any manner it so elects; and (iii) may, in its absolute discretion, apply the proceeds of any or all of such Collateral to the obligations secured by the Collateral in any order and in any manner it so elects. -12- 13 IN WITNESS WHEREOF, Debtor and Secured Party have caused this Agreement to be duly executed and delivered as of the date first above written. DEBTOR ---------------------------------- Steven A. Webster Debtor's address: 901 Threadneedle, Suite 200 Houston, Texas 77079 SECURED PARTY COMPASS BANK By: ------------------------------- Kathleen J. Bowen Vice President -13- 14 SCHEDULE A TO STOCK PLEDGE AGREEMENT Part A
Pledged Shares -------------- Number of Certificate Debtor's Percentage Jurisdiction of Issuer Shares Class Number(s) Ownership Incorporation - ---------------------- --------- ----- ----------- ------------------- --------------- R&B Falcon Corporation 143,800
-1- EX-4.4 5 6TH AMEND.TO 1ST AMENDED & COMBINED LOAN AGREEMENT 1 EXHIBIT 4.4 SIXTH AMENDMENT TO FIRST AMENDED, RESTATED, AND COMBINED LOAN AGREEMENT BY AND BETWEEN CARRIZO OIL & GAS, INC. AND COMPASS BANK This Sixth Amendment to the Loan Agreement (this "Sixth Amendment") by and between CARRIZO OIL & GAS, INC., a Texas corporation (the "Borrower"), and COMPASS BANK, a Texas chartered bank (the "Bank"), is entered into on this 23rd day of April 1999, and shall be effective as of that date for all purposes. W I T N E S S E T H: Borrower and Bank entered into a First Amended, Restated, and Combined Loan Agreement dated August 28, 1997, as amended by the First Amendment thereto dated December 23, 1997, the Second Amendment thereto dated December 30, 1997, the Third Amendment thereto dated July 30, 1998, the Fourth Amendment thereto dated September 24, 1998 and the Fifth Amendment thereto dated March 22, 1999 (collectively, the "Loan Agreement"). Capitalized terms used, but not defined herein, shall have the meanings prescribed therefor in the Loan Agreement. Borrower has requested that Bank waive non-compliance with and adjust a certain covenant in the Loan Agreement. NOW, THEREFORE, in consideration of the mutual promises herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged by Borrower and Bank, and each intending to be legally bound hereby, the parties agree as follows: I. Specific Amendments to Loan Agreement. Article I of the Loan Agreement is hereby amended by adding the following definitions thereto: "Sixth Amendment" means the Sixth Amendment to this Agreement executed by Borrower and Bank on April 23, 1999. Article III of the Loan Agreement is hereby amended by adding the following Section 3.20. 3.20 Conditions Precedent in Connection with the Sixth Amendment. The obligation of Bank to enter into the Sixth Amendment is subject to satisfaction of the following conditions precedent: 1 2 (a) Receipt of Sixth Amendment and Compliance Certificate. Bank shall have received multiple counterparts of the Sixth Amendment, as requested by Bank, and the Compliance Certificate duly executed by an authorized officer for Borrower. (b) Accuracy of Representations and Warranties and No Event of Default. The representations and warranties contained in Article IV of the Loan Agreement shall be true and correct in all material respects on the date of the Sixth Amendment with the same effect as though such representations and warranties had been made on such date; and no Event of Default shall have occurred and be continuing or will have occurred at the completion of the making of such Loan. (c) Legal Matters Satisfactory to Special Counsel to Bank. All legal matters incident to the consummation of the transactions contemplated by the Sixth Amendment shall be satisfactory to the firm of Porter & Hedges, L.L.P., special counsel for Bank. (d) No Material Adverse Change. No material adverse change shall have occurred since the date of this Agreement in the condition, financial or otherwise, of Borrower. Article V of the Loan Agreement is hereby amended by revising the following Section 5.19, as amended pursuant to the First Amendment, in its entirety to read as follows: 5.19 Tangible Net Worth Requirement. Effective December 31, 1998, Borrower shall maintain a total Tangible Net Worth of not less than $38,000,000.00, increasing by: (x) fifty percent (50%) of net income (excluding losses) of Borrower subsequent to December 31, 1998, and (y) one hundred percent (100%) of any increases in shareholders' equity resulting from the sale or issuance of stock in Borrower subsequent to December 31, 1998. For purposes of this Section, shareholders' equity shall be deemed to include the consideration paid to Borrower for its sale of the 300,000 shares of 9% Series A Preferred Stock, par value $0.01 per share, pursuant to the ECT Transaction, as well as any consideration paid to Borrower for the exercise of any of the 1,000,000 warrants that are exercisable for the purchase of 1,000,000 shares of common stock of Carrizo Oil & Gas, Inc., par value $0.01 per share, pursuant to the ECT Transaction, but shareholder's equity shall exclude the value of any such 9% Series A Preferred Stock that is subsequently redeemed by the issuance of common stock of Borrower. II. Reaffirmation of Representations and Warranties. To induce Bank to enter into this Sixth Amendment, Borrower hereby reaffirms, as of the date hereof, its representations and warranties contained in Article IV of the Loan Agreement and in all other documents executed pursuant thereto, and additionally represents and warrants as follows: A. The execution and delivery of this Sixth Amendment and the performance by Borrower of its obligations under this Sixth Amendment are within Borrower's power, have been duly authorized by all necessary corporate action, have received all necessary governmental approval (if any shall be required), and do not and will not contravene or 2 3 conflict with any provision of law or of the charter or by-laws of Borrower or of any agreement binding upon Borrower. B. The Loan Agreement as amended by this Sixth Amendment, represents the legal, valid and binding obligations of Borrower, enforceable against Borrower in accordance with its terms, subject as to enforcement only to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally. C. No Event of Default or Unmatured Event of Default has occurred and is continuing as of the date hereof. III. Defined Terms. Except as amended hereby, terms used herein that are defined in the Loan Agreement shall have the same meanings in this Sixth Amendment. IV. Reaffirmation of Loan Agreement. This Sixth Amendment shall be deemed to be an amendment to the Loan Agreement, and the Loan Agreement, as further amended hereby, is hereby ratified, approved and confirmed in each and every respect. All references to the Loan Agreement herein and in any other document, instrument, agreement or writing shall hereafter be deemed to refer to the Loan Agreement as amended hereby. V. Entire Agreement. The Loan Agreement, as hereby further amended, embodies the entire agreement between Borrower and Bank and supersedes all prior proposals, agreements and understandings relating to the subject matter hereof. Borrower certifies that it is relying on no representation, warranty, covenant or agreement except for those set forth in the Loan Agreement as hereby further amended and the other documents previously executed or executed of even date herewith. VI. Governing Law. THIS SIXTH AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. This Sixth Amendment has been entered into in Harris County, Texas, and it shall be performable for all purposes in Harris County, Texas. Courts within the State of Texas shall have jurisdiction over any and all disputes between Borrower and Bank, whether in law or equity, including, but not limited to, any and all disputes arising out of or relating to this Sixth Amendment or any other Loan Document; and venue in any such dispute whether in federal or state court shall be laid in Harris County, Texas. VII. Severability. Whenever possible each provision of this Sixth Amendment shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Sixth Amendment shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Sixth Amendment. 3 4 VIII Execution in Counterparts. Each party hereto acknowledges that this Agreement may be executed in several counterparts by each party at different times and in different locations; that each separate counterpart bearing the signature of any party may be effectively delivered to the other parties by the delivery of an electronic facsimile sent via telecopier; that each party so delivering any such counterpart shall be bound by its facsimile signature thereon; and that the signature pages from counterparts signed by each party may be collated into one or more copies of this agreement, which shall constitute one and the same agreement among all parties hereto. IX Section Captions. Section captions used in this Sixth Amendment are for convenience of reference only, and shall not affect the construction of this Sixth Amendment. X Successors and Assigns. This Sixth Amendment shall be binding upon Borrower and Bank and their respective successors and assigns, and shall inure to the benefit of Borrower and Bank, and the respective successors and assigns of Bank. XI Non-Application of Chapter 346 of Texas Finance Codes. In no event shall Chapter 346 of the Texas Finance Code (which regulates certain revolving loan accounts and revolving tri-party accounts) apply to this Loan Agreement as hereby further amended or any other Loan Documents or the transactions contemplated hereby. XII Notice. THIS SIXTH AMENDMENT TOGETHER WITH THE LOAN AGREEMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. IN WITNESS WHEREOF, the parties hereto have caused this Sixth Amendment to be duly executed as of the day and year first above written. BANK BORROWER COMPASS BANK CARRIZO OIL & GAS, INC. By: By: ------------------------------ -------------------------------- Kathleen J. Bowen Frank A. Wojtek Vice President Vice President 4 5 COMPLIANCE CERTIFICATE I, Frank A. Wojtek, Vice President of CARRIZO OIL & GAS, INC. (the "Company"), pursuant to Section 3.20 of the First Amended, Restated, and Combined Loan Agreement dated as of August 28, 1997, as amended, by and among COMPASS BANK ("Bank") and the Company (the "Agreement") do hereby certify, as of the date hereof, that to my knowledge: 1. No Event of Default (as defined in the Agreement) has occurred and is continuing, and no Unmatured Event of Default (as defined in the Agreement) has occurred and is continuing; 2. No material adverse change has occurred in the business prospects, financial condition, or the results of operations of the Company since the date of the previous Financial Statements (as defined in the Agreement) provided to Bank; 3. Each of the representations and warranties of the Company contained in Article IV of the Agreement is true and correct in all respects. This certificate is executed this 23 day of April 1999. ---------------------------- Frank A. Wojtek 1 EX-27 6 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 1,834,437 0 3,927,229 0 0 6,715,379 59,097,733 0 66,119,995 14,849,063 0 31,503,330 0 103,750 9,819,447 66,119,995 1,842,314 1,842,314 0 1,686,895 707,525 0 0 (545,621) 7,002 (552,623) 0 0 77,731 (630,354) (.14) (.14)
-----END PRIVACY-ENHANCED MESSAGE-----